- David Sacks rejected the idea of a 0.01% crypto transaction tax, citing concerns over tax expansion and bureaucratic overreach.
- The Trump administration has floated the idea of eliminating the IRS entirely, shifting to tariff-based taxation to fund the government.
David Sacks, the White House’s crypto and AI czar, dismissed the idea of a 0.01% tax on cryptocurrency transactions during a discussion on the “All-In Podcast.”
The proposal, introduced by tech investor Jason Calacanis, was to generate government reserves in Bitcoin [BTC] and other digital assets.
The idea, introduced by tech investor and podcast host, was swiftly met with skepticism and concern.
The discussion sparked a broader debate about government taxation. Sacks argued that even small tax policies tend to expand over time, eventually impacting more individuals than originally intended.
“That’s always how taxes start”
His remarks echoed historical precedents. Sacks compared the idea to the early days of U.S. income tax.
When first introduced in 1913, it applied only to a small group of high earners. Over time, tax policies expanded, reaching millions of Americans.
Source: X
Calacanis proposed a straightforward tax mechanism. In that, every crypto transaction in the U.S. would be taxed at 0.01%, with the fee collected in the native asset being traded.
He argued that it would create a steady stream of digital assets for the government, and strengthen its position in an era of increasing financial digitization.
Calacanis said,
“Crypto wants to be legal. Crypto wants to be regulated. They want the rules. They want the rails. Why don’t we charge every transaction in the United States 0.01% in that native currency and put it in the stockpile?”
Sacks pushed back on this idea. He warned that even a seemingly minimal tax could set a dangerous precedent.
“That’s always how taxes start. They are described as being very modest. When the income tax started, it only applied to a thousand Americans, and the legislators swore up and down that it would never be applied to middle-class people.”
Sacks warned that even small taxes create bureaucratic hurdles, increasing regulations for businesses and frequent traders. He also noted that taxing personal wallet transfers would go beyond speculative trading.
Sacks’ concerns are rooted in historical patterns.
A “modest” tax today, a financial burden tomorrow?
The 16th Amendment introduced the federal income tax in 1913, initially targeting only high earners.
The first tax rate was 1% on incomes above $3,000, affecting a small group. By 1918, the top rate surged to 77% on incomes over $1 million due to World War I.
A similar pattern has been observed in the crypto sector.
Initially, crypto taxation focused only on capital gains, but over time, the IRS has expanded its scope to include mining rewards, staking income, airdrops, and even transactions between personal wallets.
While the White House has rejected the idea of a crypto transaction tax, a parallel debate is unfolding over the future of federal taxation in the U.S.
Abolish the IRS?
Recent statements from Commerce Secretary Howard Lutnick suggest that former President Donald Trump’s administration is considering a radical shift away from the current tax structure.
Instead of an income tax system, the proposal would rely on tariffs on foreign goods to generate revenue.
Lutnick stated,
“Donald Trump announces the External Revenue Service, and his goal is very simple. To abolish the IRS and let all the outsiders pay.”
He argued that foreign businesses operating in the U.S. benefit significantly while avoiding American taxes,
“You ever see a cruise ship with an American flag on the back? They have flags of Liberia or Panama. None of them pay taxes. Every super tanker, none pays taxes. Alcohol, all foreign alcohol, no taxes.”
This shift, according to Lutnick, would allow Americans to pay lower taxes while maintaining government revenue through tariffs on foreign entities.
He estimated that adopting a system of “reciprocal tariffs”, which is, raising import taxes to match those of other countries, could generate $700 billion annually.
White House says no, but is this the last we’ll hear of it?
The debate surrounding cryptocurrency taxation and broader federal tax reform is closely linked. While crypto advocates oppose new transaction taxes, they have also criticized the IRS for unclear guidelines and overreach in regulating the sector.
Recent legislative moves, including a bipartisan Senate vote to overturn expanded IRS reporting requirements for crypto transactions, indicate growing resistance to excessive taxation and surveillance.
At the same time, the Trump administration’s tariff-based approach raises questions about how crypto taxation might evolve in a radically different tax ecosystem.
If income taxes are reduced or eliminated, could crypto transactions eventually be taxed as part of a broader revenue strategy?
