Friday, Feb. 9, 2018
Arizona could allow tax payments in Bitcoin and other cryptocurrencies
PHOENIX – Arizonans could be the first in the country to pay their state taxes in Bitcoin if a bill introduced in the Legislature becomes law.
Proponents say this would put Arizona on the forefront of the innovative cryptocurrency technology. Critics say the bill is a solution in search of a problem that doesn’t exist, and that cryptocurrencies are too new to accept in tax payments.
The bill, if passed, would allow the state Department of Revenue to accept tax payments in cryptocurrencies. The New Hampshire Legislature considered a similar bill that failed in 2017.
Cryptocurrencies are a digital currency, using code and encryption to protect their creation and transfer. Although they have become increasingly popular because of their security and universality – cryptocurrencies can be accepted around the globe – some financial and technology experts say it’s too early to tell whether cryptocurrencies will be reliable long term.
Sen. Warren Petersen, R-Gilbert, who sponsored Senate Bill 1091, said his constituents had requested it, and introducing the measure would create more convenience and ease for taxpayers.
“I don’t think it’s mainstream yet, but there are millions of people in the United States that hold it,” Petersen said. “There are places right now that you can use the currencies, that are retailers like Overstock.com, Expedia, various coffee shops, so there is a retail market where the currency is used.”
About 60 percent of Americans are aware of Bitcoin, and 5 percent own the cryptocurrency, according to SurveyMonkey . Microsoft and other companies have accepted Bitcoin payments; however, Facebook recently blocked all cryptocurrency advertisements , citing concerns over “misleading or deceptive promotional practices.”
More than 100 people have registered in opposition to the bill.
Bryna Koch, a doctoral student at the University of Arizona, opposed the bill after she received a notice from Civic Engagement Beyond Voting, a progressive advocacy group that sends out weekly legislative updates and recommends positions to take on bills.
“This is a policy proposal in search of a problem, rather than a policy proposal that addressed a problem in the state of Arizona,” Koch said.
She said more details in the bill, such as whether the revenue department has the infrastructure to complete this task, would help to gain her support.
Bitcoin and other cryptocurrencies are not backed or regulated by any government – which earns supporters and detractors.
Many have criticized the lack of government regulations that could help stabilize the virtual currency. At the recent World Economic Forum in Davos, Switzerland, several attendees hesitated to even call Bitcoin a currency, saying it was too volatile to be considered such, according to CNN . The Internal Revenue System treats Bitcoins as capital assets , like stocks, rather than an alternate currency.
Rep. Jeff Weninger, R-Chandler, a co-sponsor of the the bill, compared it to autonomous vehicles, which Arizona has been loose in regulating while the technology develops.
“(Arizona is) kind of on the cutting edge of trying to be out there and be in front of it,” he said. “By the time you pick up a technology and adapt to something and you wait, you’re behind everybody else as becoming the emerging leaders … so we don’t want to wait.”
Victor Benjamin, an assistant professor in Arizona State University’s W.P. Carey School of Business and an expert in cybersecurity, said he didn’t see a need for the bill.
“This is one phenomena that’s always been existing with the internet, where the rate of technology right now is vastly outpacing the rate of legislation,” Benjamin said. “I think with Bitcoin, what is really needed to make it a more legitimate medium of exchange is some sort of regulation. … I do think cryptocurrencies are very powerful and could be used as a legitimate means of exchange in the future, but there’s just too much risk at the current moment.”
SB 1091 would allow the state to accept Bitcoin and Litecoin , but the Arizona Department of Revenue reserves the ability recognize others. The bill has passed Senate and is headed to the House of Representatives.
If it were to become law, it would take effect Jan. 1, 2020.
“There are more people than you would probably imagine that hold cryptocurrrency,” Petersen said. “Rather than having to exchange it, there’s one more thing they can use it for.”[su_divider top=”no” size=”1″ margin=”10″] [sub-tag]