New Hampshire Bill Backs Bitcoin for State Taxes(panampost.com)
panampost.com
New Hampshire Bill Backs Bitcoin for State Taxes
http://panampost.com/belen-marty/2015/02/04/new-hampshire-bill-backs-bitcoin-for-state-taxes/
58 comments
New Hampshire has one state representative per 3,291 citizens, which means each representative is being elected by an extremely small electorate. This is the smallest in the country. The US average is one state representative per 60,000, and the largest, California, is 465,674 people per representative.
The state is also subject to huge rapid swings in the majority. In 2008 Republicans won 43.5% of the seats, in 2010 Republicans won 72% of seats, in 2012 they won 45% of the seats, and in 2014 they won 60%.
While you could certainly argue that there are some benefits to this system, This American Life had a good episode on some of the cultural problems that this system has led to (see Act 2) - http://www.thisamericanlife.org/radio-archives/episode/478/r...
The state is also subject to huge rapid swings in the majority. In 2008 Republicans won 43.5% of the seats, in 2010 Republicans won 72% of seats, in 2012 they won 45% of the seats, and in 2014 they won 60%.
While you could certainly argue that there are some benefits to this system, This American Life had a good episode on some of the cultural problems that this system has led to (see Act 2) - http://www.thisamericanlife.org/radio-archives/episode/478/r...
Fun NH facts: the House of Representatives has 400 members, one for every 3,300 residents. If the US were this well represented in the federal government, then there would be ~99,000 representatives. It also has swung hugely between republican and democratic over the last couple elections, single-handedly swamping naive nation-wide counts of state legislature changes.
Also the senate only has 24 members, making a hugely unbalanced bicameral legislature.
Also the senate only has 24 members, making a hugely unbalanced bicameral legislature.
> just everyday people who have decided to do as single term in state government, and have little to no plans to run again.
That the most politically beautiful strategy I've ever seen. I wish politics wasn't a star-fucking showboating circus. I wish it was about helping people, but apparently that's a radical stance.
That the most politically beautiful strategy I've ever seen. I wish politics wasn't a star-fucking showboating circus. I wish it was about helping people, but apparently that's a radical stance.
Reminder: New Hampshire Porcupine Festival is one of the best technology events of the year in the USA. Tech talks, hackathons, firing guns w/ 3D-printed magazines, homeschooling, mesh networking, all sorts of drones / FPV vehicles, and on and on. And you can buy just about anything with cryptocurrency, from organic vegetables to an AR-15.
If you haven't been, it's really a must-see phenomenon.
http://porcfest.com/
If you haven't been, it's really a must-see phenomenon.
http://porcfest.com/
... and of course Bitcoin 101 is one of the first talks, right after "Outdoors safety". Oh man, wish I could go, wrong part of the world for me.
Also, the 'official' schedule is only the 4 main tracks (plus music and kids activities, etc). In addition, there are several DIY tracks at the various camps, including the "Alt Expo," which has many of the more advanced tech talks (about a quarter mile from the main pavilion as the quadcopter flies).
There was also a 'pirate tent' which had a PGP-keysigning / local beer exchange party that was absolutely over-the-top.
Dozens of - probably over a hundred - NH beers (many of which were single keg or smaller) for trade only (no money exchanged hands) and a pretty serious PGP web. Quite a freaking sight.
June can't come quickly enough! :-)
I'll actually have a newborn at that time, so I'm not 100% sure of my ability to go this year.
There was also a 'pirate tent' which had a PGP-keysigning / local beer exchange party that was absolutely over-the-top.
Dozens of - probably over a hundred - NH beers (many of which were single keg or smaller) for trade only (no money exchanged hands) and a pretty serious PGP web. Quite a freaking sight.
June can't come quickly enough! :-)
I'll actually have a newborn at that time, so I'm not 100% sure of my ability to go this year.
I have thought about going for years. But now that you mention PGP-keysigning, that's clinched it. I had no idea. I guess that's not the sort of thing you put on a normal flyer.
Would Bitcoin be stable enough to accept and maintain? Serious question. It seems like the state would have to immediately exchange the Bitcoins for dollars, which costs money and would have a very specific impact on the market (maybe that's the point?).
What sensibly-run organization would choose a scheme where their revenue would be exposed to such large fluctuations, as opposed to the dollar? It's nuts.
I suspect they would cash out immediately. After all the taxes are denominated in USD. The article mentions that the state wouldn't pay any fees though, that's the part I'm really curious about.
The bill specifies that the plan must include the use of "an appropriate third party payment processor that will process bitcoin transactions at no cost to the state."
This doesn't mean that there would be no fees, it means that the payment processor could only charge fees to the taxpayer, not the State.
This doesn't mean that there would be no fees, it means that the payment processor could only charge fees to the taxpayer, not the State.
BitPay currently offers this to merchants and non profits so it may not be that much of an ask.
If they cash out immediately, we'll know that there will be one large buyer around April 15. Wouldn't that enable collusion in the market?
I don't see how this doesn't cost us money unnecessarily, otherwise I wouldn't really care one way or another if we start accepting internet fun bucks.
The State is still going to do business in USD; looking at the volatility of USD/BTC exchange rate, exchange fees and infrastructure/training, I don't see how this is anything but a loosing proposition.
The State is still going to do business in USD; looking at the volatility of USD/BTC exchange rate, exchange fees and infrastructure/training, I don't see how this is anything but a loosing proposition.
> I don't see how this is anything but a loosing proposition.
Its a winning proposition to the third-party payment processor mandated to be contracted by the bill, and -- presuming the method of accepting bitcoins is that the payment processor takes bitcoins and provides the state with USD -- its not a losing proposition for the State so long as the bitcoin costs are set at a level such that the state always gets the full USD value of the taxes and fees.
I don't see how its really a losing proposition.
Its a winning proposition to the third-party payment processor mandated to be contracted by the bill, and -- presuming the method of accepting bitcoins is that the payment processor takes bitcoins and provides the state with USD -- its not a losing proposition for the State so long as the bitcoin costs are set at a level such that the state always gets the full USD value of the taxes and fees.
I don't see how its really a losing proposition.
So what happens when there is a massive fluctuation in price and that third-party payment processor declares bankruptcy? It's not like this is being backed by a major financial institution.
We're talking about a currency that could lose half it's value in a matter of hours. And when their total tax revenue is $3.2 BILLION, what third party processor is going to be able to soak up the potential losses?
We're talking about a currency that could lose half it's value in a matter of hours. And when their total tax revenue is $3.2 BILLION, what third party processor is going to be able to soak up the potential losses?
Q: "So what happens when there is a massive fluctuation in price"
A: Nothing, as all bitcoins would be instantly converted into US Dollars removing all currency volatility risk. I directly made sure that was in the bill to address that concern.
Best, Rep. Schleien Prime Sponsor of New Hampshire House Bill 522
A: Nothing, as all bitcoins would be instantly converted into US Dollars removing all currency volatility risk. I directly made sure that was in the bill to address that concern.
Best, Rep. Schleien Prime Sponsor of New Hampshire House Bill 522
What can 'instantly' possibly mean in this context? The same day? minute? millisecond? Triggered by how big of a change?
> What can 'instantly' possibly mean in this context?
"Before the transaction with the State is legally considered complete and the taxpayers liability settled" would seem to be the relevant thing.
The taxpayer might lose in this case, but the State would not (and, the risk the taxpayer faces is pretty much the same risk as they would face holding money they need to pay taxes in bitcoins whether or not there was a standard payment processor for bitcoin-to-pay-taxes for the state.)
"Before the transaction with the State is legally considered complete and the taxpayers liability settled" would seem to be the relevant thing.
The taxpayer might lose in this case, but the State would not (and, the risk the taxpayer faces is pretty much the same risk as they would face holding money they need to pay taxes in bitcoins whether or not there was a standard payment processor for bitcoin-to-pay-taxes for the state.)
Using a payment processor like BitPay would allow this. Essentially you click to pay in bitcoin, you redirect to the BitPay site, you pay them bitcoin and they transfer the USD value to the recipient (in this case the state).
So an individual could pay $10k in bitcoin and the state would receive $10k in USD. BitPay currently offer their service for free that would meet these requirements.
https://bitpay.com/pricing
so to answer your question instantly means instantly.
So an individual could pay $10k in bitcoin and the state would receive $10k in USD. BitPay currently offer their service for free that would meet these requirements.
https://bitpay.com/pricing
so to answer your question instantly means instantly.
So who is giving BitPay cash for the coins instantly? Are there literally buys just chomping at the bit, even when the market is in a downward trend, to buy coins from BitPay, for cash, instantly after they put them up for sale? At some point the piper has to be paid, and if it isn't a large financial institution, I'm still not seeing how this plays out. There has to be someone to soak up the massive loss in value...
As far as I can tell, BitPay has less than $100 million in investment, I don't see how that even comes close to covering the risk.
As far as I can tell, BitPay has less than $100 million in investment, I don't see how that even comes close to covering the risk.
Bitpay uses exchanges such as Bitstamp to sell the coins immediately. There are plenty of buy orders there to cover these purchases. Note that this doesn't mean every tax bill is due to be paid by bitcoin but individuals could if they wanted to.
Perhaps you are unfamiliar with bitcoin, I'm not sure. For every seller on a exchange there is a buyer. Yes if there happened to be a flash crash this may be an issue but generally this hasn't been a problem. As an example, bitpay will lock in the dollar value for a 10 minute period, as long as you pay in that window they guarantee the retailer the USD value and the buyer the BTC price. To achieve this they would keep some funds in btc all the time, then when a sale like this comes in they sell the equivalent amount (or a part of it) to hedge against future fluctuations.
I think you are thinking that the states entire tax revenue would come via this method, currently I doubt there are enough BTC in that state to achieve that outcome. But anyway this proposal is feasible as it currently stands.
Perhaps you are unfamiliar with bitcoin, I'm not sure. For every seller on a exchange there is a buyer. Yes if there happened to be a flash crash this may be an issue but generally this hasn't been a problem. As an example, bitpay will lock in the dollar value for a 10 minute period, as long as you pay in that window they guarantee the retailer the USD value and the buyer the BTC price. To achieve this they would keep some funds in btc all the time, then when a sale like this comes in they sell the equivalent amount (or a part of it) to hedge against future fluctuations.
I think you are thinking that the states entire tax revenue would come via this method, currently I doubt there are enough BTC in that state to achieve that outcome. But anyway this proposal is feasible as it currently stands.
Ah. I misconstrued the comment to mean the conversion would happen upon some massive fluctuation. Thanks for the clarification.
I've been in contact with BitPay directly. They would be in my view certainly suitable for this kind of thing.
And yes instantly means instantly.
Eric Schleien Prime Sponsor
And yes instantly means instantly.
Eric Schleien Prime Sponsor
Just seem this, good work on getting involved.
They charge extra to accept credit cards, they could easily charge extra for bitcoins to cover fees.
CC merchant contracts used to forbid this, IIRC.
Effective January 27, 2013, this was no longer against the merchant agreements with Visa and Mastercard (it was previously).
Whether there is a state law forbidding the practice (or more likely, requiring specific language to advertise the 'cash discount price') is likely to vary by jurisdiction.
Whether there is a state law forbidding the practice (or more likely, requiring specific language to advertise the 'cash discount price') is likely to vary by jurisdiction.
True, yet paying your taxes by credit card has always had fees, for the last decade or two. The government really has zero incentive to accept credit cards and eat the fees, so I'm guessing the credit card companies allowed it in this case.
It has just been announced that the hearing for this bill will be on February 12, 2015 @ 11:30 AM EST at the NH Legislative Office Building in Room 2002
If any of you would like the opportunity to speak on behalf of this bill -- your help would be welcome!
If any of you would like the opportunity to speak on behalf of this bill -- your help would be welcome!
Link to the bill: https://legiscan.com/NH/text/HB552/2015
What's the benefit? It seems like it would just add more complexity to the tax process and therefore increase the cost of the entire process.
Benefit:
Less Costs to the State (lower transaction fees) + $0 set up fee. More secure than credit card transactions.
Safer/More Secure + Cheaper = Benefit
---
And yes completely constitutional. Nobody is issuing currency. It's simply providing a means of payment that is getting converted into US Dollars through a third party payment processor. BitPay was mentioned as a company that provides those services above.
Hope this clarifies.
Eric Schleien Prime Sponsor
Less Costs to the State (lower transaction fees) + $0 set up fee. More secure than credit card transactions.
Safer/More Secure + Cheaper = Benefit
---
And yes completely constitutional. Nobody is issuing currency. It's simply providing a means of payment that is getting converted into US Dollars through a third party payment processor. BitPay was mentioned as a company that provides those services above.
Hope this clarifies.
Eric Schleien Prime Sponsor
IANAL... is this even legal given that the US Dollar is the only official currency of the United States?
The legal tender status of US dollars doesn't prevent any party, public or private, from accepting payment in other forms, whether currency or commodities.
It does mean that US courts, when awarding damages (even for a contract denominated in some other currency) will do so in dollars, and that a tender of payment in dollars for a debt will generally be given legal effect.
And, anyhow, if it doesn't require the state to actually hold bitcoins, it may mean the State just contracts with any of the many entities that takes payment in BTC and converts it to dollars. Its no different, in effect, than the state deciding to take VISA instead of just cash or check.
EDIT: on review, the bill requires that the plan includes contracting with a third-party payment processor.
It does mean that US courts, when awarding damages (even for a contract denominated in some other currency) will do so in dollars, and that a tender of payment in dollars for a debt will generally be given legal effect.
And, anyhow, if it doesn't require the state to actually hold bitcoins, it may mean the State just contracts with any of the many entities that takes payment in BTC and converts it to dollars. Its no different, in effect, than the state deciding to take VISA instead of just cash or check.
EDIT: on review, the bill requires that the plan includes contracting with a third-party payment processor.
the hilarious thing is that it is TOTALLY unconstitutional.
Article 1 section 10 provides that "No State shall... make any Thing but gold and silver Coin a Tender in Payment of Debts."
Of course, striking down the act by virtue of its violation of this provision would also expose the fact that dollars are no longer gold and silver, either, and thus are also unconstitutional as legal tender for the states.
Article 1 section 10 provides that "No State shall... make any Thing but gold and silver Coin a Tender in Payment of Debts."
Of course, striking down the act by virtue of its violation of this provision would also expose the fact that dollars are no longer gold and silver, either, and thus are also unconstitutional as legal tender for the states.
But the state isn't making Bitcoin legal tender, and states don't make dollars legal tender, either.
"Legal tender" is something that can be used to pay debts and that a creditor is legally required to accept. Dollars being legal tender is something instituted by the federal government.
States, on the other hand, must accept dollars to pay state taxes (as that's legal tender), but they can also accept anything else they like in lieu of dollars (if both the state and the person paying taxes agree on this alternate payment), whether that's Bitcoins, chickens, or performances of the Thriller dance.
"Legal tender" is something that can be used to pay debts and that a creditor is legally required to accept. Dollars being legal tender is something instituted by the federal government.
States, on the other hand, must accept dollars to pay state taxes (as that's legal tender), but they can also accept anything else they like in lieu of dollars (if both the state and the person paying taxes agree on this alternate payment), whether that's Bitcoins, chickens, or performances of the Thriller dance.
I stand corrected, but will keep the karma points.
There is a big body of literature demonstrating how the value of money is derived from the state's ability to levy and enforce taxes[1]. In fact, this is the basis of most sovereign currency regimes with floating fx. In these regimes, governments issue currency out of thin air and levy taxes to force its ubiquity. However, at the U.S state level(CA,FL,TX,etc) and in the case of the Euro(France,PIGS,etc)at the national level, these entities are constrained by tax revenue and ability to borrow same as a household or business. Thus, instead of bitcoin, which is backed by nothing, why not have states issue their IOU's to pay state liabilities but also accept those IOU's to retire liabilities to the state. Naturally, this idea is in lieu of federal aid which has been withheld to states because of austerity politics.
[1] http://neweconomicperspectives.org/2011/06/modern-money-theo...
[1] http://neweconomicperspectives.org/2011/06/modern-money-theo...
It's probably a bit too soon for something like "pay my taxes in bitcoin"... but ultimately a government transacting in a transparent fashion such as this _MUST_ be a step in the right direction? No?
I don't believe this would add transparency. All they would likely do is immediately exchange it for USD. I don't think they would keep it in a wallet where we could keep track of their expenditures.
What follows is unlikely:
If the majority of taxpayers were to pay in Bitcoin, revenues would be transparent, which is a step toward a free and open public audit of budgets.
If the majority of taxpayers were to pay in Bitcoin, revenues would be transparent, which is a step toward a free and open public audit of budgets.
You know that you can get the NH budget and audit it yourself, right now, right?
Free and open were the key points. Since the transactions are public they are independently verifiable. I am not accusing the state of lying or fraud, but this would be a check on that possibility.
Again it is not likely that Bitcoin would ever make up enough of the tax revenue for the thought to even be relevant. It was only in response to the transparency question.
Again it is not likely that Bitcoin would ever make up enough of the tax revenue for the thought to even be relevant. It was only in response to the transparency question.
How would revenues be transparent unless one or both parties tag the payment as "this is tax"? The payment processor needs to use a separate address for each incoming transaction, much the same as they do with their other clients now, so there's nothing there that marks a payment as being tax.
The payment processor does cloud the ideal, leaving me right back at "too soon". In this utopian place where I can see my local government's bitcoin balance sheet, it sounds great.
I don't think so. I think widespread adoption aids in stabilizing the currency.
Someone could create a POS machine that rendered taxes directly to the state at the time of sale or in batches. Also people could discover a company's sales figures by watching the blockchain.
You could see how much was being paid to the state but not by whom. This adds transparency at the state level as payments would be made to a known address, however where the payments are from would be anyone's guess.
I think you could figure it out pretty quickly by tracking/making your own purchases.
Not if the merchant give each buyer a new bitcoin address (best practice), did not store all their bitcoin on a single address (best practice) and used any sort of exchange to hold coins at any point (common practice) all of these would obfuscate the merchants actual holdings, sales etc. Enough so that it would be difficult for a competitor to track you accurately enough for it to be worth the effort. Plus if they did have any other bitcoin income or savings it would cloud the situation even further.
Once you are one step (transaction) away from the known address i.e. The one you sent coins to in order to track them, you have no way of knowing or proving that the merchant controls any subsequent address.
If for example bitpay handled their transactions you would see funds sent to bitpay, if the merchant kept 100% in btc but only got paid out by bitpay weekly then how do you know what was sent to the merchant?
Once you are one step (transaction) away from the known address i.e. The one you sent coins to in order to track them, you have no way of knowing or proving that the merchant controls any subsequent address.
If for example bitpay handled their transactions you would see funds sent to bitpay, if the merchant kept 100% in btc but only got paid out by bitpay weekly then how do you know what was sent to the merchant?
NH has no state sales tax.
Can state taxes currently be pain in New Hampshire with anything other than USD?
The right way to do it, as far as I can see, is to allow people to report their taxes in whichever form of money they prefer. US Dollars, Euros, gold would all be a valid numeraire to use when reporting your current assets and income to the IRS. And the currency you choose to report your taxes in, is the currency you pay taxes in.
This is just currency competition. Nothing more than that. The ability to freely choose which currency you want to use to measure value.
Whether bitcoin should be considered alongside dollars, yen and silver is an open question. If people are allowed to report their taxes in bitcoins, they can really shoot themselves in the foot. But, personally, I'm generally speaking not in favor of the government preventing people from shooting themselves in the foot.
Say, for example, I choose to report my taxes in bitcoins. I currently hold 10 bitcoins and $1,000. Later, the price of bitcoins in dollars (BTCUSD) falls from 225 to 50. This means that one dollar is now worth 1/50 bitcoin instead of 1/225 bitcoin. I then buy 20 bitcoins using the $1,000, and -- because I report my taxes in bitcoins -- it means I've realized a capital gain of ($1,000×(1/50) - $1,000×(1/225)) = 20 BTC - 4.4444 BTC = 15.5556 BTC, on which I pay capital gains tax. The bitcoin value of my dollars has increased (before 1/225 bitcoin per dollar, now 1/50 bitcoin per dollar), so I have to pay bitcoins to the IRS if I convert dollars into bitcoins, after the bitcoin price falls.
This just shows that bitcoin really isn't ready to be used as proper money. Proper money is a money you would report your taxes in. Bitcoin just isn't stable enough in value yet.
This is just currency competition. Nothing more than that. The ability to freely choose which currency you want to use to measure value.
Whether bitcoin should be considered alongside dollars, yen and silver is an open question. If people are allowed to report their taxes in bitcoins, they can really shoot themselves in the foot. But, personally, I'm generally speaking not in favor of the government preventing people from shooting themselves in the foot.
Say, for example, I choose to report my taxes in bitcoins. I currently hold 10 bitcoins and $1,000. Later, the price of bitcoins in dollars (BTCUSD) falls from 225 to 50. This means that one dollar is now worth 1/50 bitcoin instead of 1/225 bitcoin. I then buy 20 bitcoins using the $1,000, and -- because I report my taxes in bitcoins -- it means I've realized a capital gain of ($1,000×(1/50) - $1,000×(1/225)) = 20 BTC - 4.4444 BTC = 15.5556 BTC, on which I pay capital gains tax. The bitcoin value of my dollars has increased (before 1/225 bitcoin per dollar, now 1/50 bitcoin per dollar), so I have to pay bitcoins to the IRS if I convert dollars into bitcoins, after the bitcoin price falls.
This just shows that bitcoin really isn't ready to be used as proper money. Proper money is a money you would report your taxes in. Bitcoin just isn't stable enough in value yet.
Why would the state want to take on the complexity of dealing with the situation you described, just to encourage "currency competition"?
I don't think the complexity would be that great. It's not like different tax rules apply, it's just a different numeraire. Now, remember, people reporting their taxes are not forced to change anything, they are just given the opportunity.
I guess the basic reason I promote currency competition is that I think people have the right no use whichever money they prefer. And in order to not give preference to the national currency, produced by the central bank, it must be possible to report ones taxes in another currency/money.
I guess the basic reason I promote currency competition is that I think people have the right no use whichever money they prefer. And in order to not give preference to the national currency, produced by the central bank, it must be possible to report ones taxes in another currency/money.
The purpose is not to create currency competition. The purpose would be to make it easier for citizens to interact with their Government.
New Hampshire is a very quirky state, politically, in a number of ways. In a sense, New Hampshire state government looks a lot more like city-level or county-level government in many other states.
Compared to other states, state representatives are far more likely to "average citizens" instead of career politicians - just everyday people who have decided to do as single term in state government, and have little to no plans to run again. This is very frustrating for the leadership of both chambers, since it makes it very difficult to whip votes! On the other hand, it arguably makes it easier for elected officials to buck party lines and vote their conscience, if they so choose.
In addition New Hampshire does not (last I checked) have direct-vote ballot initiatives the way California does, but it does make it much easier for citizens to propose legislation. Whether or not this legislation gains traction or actually passes is a separate matter. Look no further than the long history of repeated attempts at marijuana policy reform in NH to see just how difficult it can be to predict which bills will end up gaining traction[0].
As a result, it's very common to see bills that are proposed and supported by a small contingent of backers, but never end up going anywhere. This bill may or may not end up passing, but just keep this context in mind whenever you read news about a bill being brought to the NH legislature with only a handful of supporters.
[0] This issue is actually a particularly fascinating case study in NH government, because NH is a very libertarian-leaning state, and it baffled reform advocates for the longest time that they had such difficulty in getting NH to pass relatively uncontroversial reform measures.