Lummis cautioned that the proposed tax could push Bitcoin mining overseas, similar to China’s ban that affected 90% of the industry.
On July 23, Cynthia Lummis released a report arguing against the Biden administration’s proposed 30% excise tax on the energy consumed by Bitcoin miners.
Lummis argues that this tax could severely impact the growing Bitcoin mining industry in the U.S., based on what she describes as “unfounded concerns” about environmental pollution and risks to the energy grid.
Lummis’ Critique
“Even if we assume the administration’s goals are genuine, this tax should still be rejected,” Lummis argued. She described the proposed tax as a poorly designed policy that could have serious effects, undermining its stated objectives.
Lummis warned that the proposed tax could drive Bitcoin mining operations overseas to more favorable jurisdictions. She cited the aftermath of China’s ban on Bitcoin mining, where 90% of the industry either closed or moved. She explains that given energy is the primary cost in Bitcoin mining, even small tax increases could be devastating.
“If the United States imposes a blanket tax on Bitcoin mining, a similar exodus could occur here, leading to a loss of economic benefits and job opportunities for American communities.”
The administration claims Bitcoin mining risks local utilities and grid operations but lacks empirical support. Lummis argues that Bitcoin mining can strengthen energy grids. She explained that miners can quickly adjust energy use to balance supply and demand, preventing blackouts.
In Texas, Bitcoin miners have worked with ERCOT to stabilize the grid during peak demand, selling 1,500 MW back during Winter Storms Elliot and Heather. August 2023 data shows Bitcoin miners provide an interruptible load equivalent to 25% of all utility battery storage in the U.S. and Canada.
A 2023 study found Bitcoin mining could be ten times more effective than current technology in restoring grid frequency during disasters. Lummis noted Bitcoin mining facilities, like electric vehicles, are fully electric and increasingly use cleaner energy sources.
The Bitcoin Energy and Emissions Sustainability Tracker estimates up to 52.6% of the energy used by Bitcoin miners is emission-free and improving. A KPMG report also found Bitcoin mining uses as much energy as household appliances like tumble dryers.
Economic and Infrastructure Benefits
Lummis argued that Bitcoin mining is already showing promise as important for upgrading America’s energy infrastructure. “At this stage, we should continue to study the effects of rapid deployment of this technology and allow it to mature. Threatening the industry with aggressive taxes would only leave America’s infrastructure stuck in the past,” she said.
Lummis highlighted the economic benefits of Bitcoin mining for underserved areas, noting that miners are lawful American businesses paying taxes and significantly contributing to community development, especially in rural or economically depressed regions.
The report concluded with a warning: “If America fails to create a supportive and stable environment for Bitcoin mining, we risk squandering the advantages we currently enjoy and may find ourselves playing catch-up in a race we once had every opportunity to lead.”