Bill Miller IV, the chief investment officer of Miller Value Partners, has sparked a debate in the financial world by stating that taxing Bitcoin “doesn’t make a ton of sense.” In a recent podcast appearance, Miller articulated a fundamental challenge to the basis for levying taxes on decentralized digital assets.
Miller's core argument is rooted in the nature of Bitcoin itself. He contended that taxes, particularly those related to assets like real estate, are justified because they fund the government infrastructure required to track and enforce property rights. “When you buy or sell a house, all that recordation tax, all those taxes go toward keeping track of who owns what,” Miller explained. With Bitcoin, however, this function is performed by the technology itself. “The blockchain does that property automation for itself, right?” he stated, adding that “the government didn't create Bitcoin.”
Despite Miller's logic, the current regulatory reality in the United States presents a different picture. The Internal Revenue Service (IRS) has issued clear guidance, stating that cryptocurrency is to be treated as property, rather than currency, for US federal income tax purposes. This classification means that gains from crypto are subject to either capital gains or income taxes, depending on the transaction. You'll pay Capital Gains Tax anytime you make a gain from selling, trading, or spending crypto. Furthermore, you'll pay Income Tax when you earn new tokens, such as from staking rewards, mining, or airdrops.
The tax rate depends on how long the asset was held. Short-term capital gains (held for less than a year) are taxed at income tax rates (10% to 37%), while long-term gains (held over a year) are taxed at reduced rates (0%, 15%, or 20%).
The debate over taxing crypto extends beyond the technicalities. Proponents of taxation point to the need for fairness, arguing that gains from crypto should be treated like traditional income, and that the revenue could provide governments with additional funds for public services. However, opponents raise concerns about privacy and the potential impact on innovation. The complexity of tracking transactions on a decentralized network remains a significant challenge for tax authorities globally. As regulators continue to evolve their policies, the uncertainty around taxation remains a key hurdle for traditional investors, as Miller noted.