Translated for your state and federal political seats to hear:
Bitcoin as Digital Savings: A Case for Revised Taxation Policy
Dear [Representative/Senator Name],
I write to urge your reconsideration of how Bitcoin is taxed, particularly the treatment of Bitcoin transactions as taxable capital gains events. Current policy fundamentally mischaracterizes Bitcoin’s primary function and inadvertently penalizes constituents for protecting their savings from inflation.
Bitcoin Functions as a Digital Savings Account:
While some adopters initially approach Bitcoin as a speculative investment, those who truly understand Bitcoin are fleeing inflation. Bitcoin should be understood as a digital savings account rather than a speculative investment. When your constituents move money from a traditional savings account to Bitcoin, they are not seeking “gains” - they are seeking to preserve their purchasing power against monetary debasement.
Even though some gains are generated from the adoption curve of more people buying Bitcoin, this is healthy because it encourages adoption of something that will be healthy for our families, healthy for our municipalities, and healthy for our nation. We want this adoption rewarded and encouraged.
Inflation Protection:
Traditional savings accounts lose purchasing power at roughly 3-8% annually due to inflation. Bitcoin serves as a digital safe harbor that maintains purchasing power over time, similar to how gold historically protected savings from currency debasement.
Savings Preservation, Not Speculation:
When a constituent exchanges inflating dollars for Bitcoin, although some are making an investment bet - all are taking an action to defend their savings. The dollar value increase merely reflects the dollar’s declining purchasing power, not true economic gains.
Penalizing Prudent Savings: Current tax policy effectively penalizes citizens for protecting their life savings from inflation. This creates a perverse incentive where responsible savers are taxed for preserving their purchasing power while those who allow inflation to erode their savings face no tax consequences.
How This Impacts Your Constituents
Working Families: Middle-class families watching their savings lose value to inflation turn to Bitcoin as a digital savings vehicle. Current tax policy punishes them for this prudent financial decision.
Retirees: Fixed-income retirees using Bitcoin to preserve their nest egg face complex tax reporting requirements and potential tax liability simply for maintaining their purchasing power.
Small Business Owners: Entrepreneurs using Bitcoin as a business savings account face administrative burdens that discourage adoption of superior monetary technology.
Everyday Transactions: Citizens cannot practically use Bitcoin for daily purchases when every transaction creates a potential taxable event, defeating its utility as functional money.
Policy Framework for Constituent Service
To best serve your constituents, I recommend legislation that recognizes Bitcoin’s monetary nature.
Treat Bitcoin as Currency, Not Property:
Reclassify Bitcoin transactions under currency exchange rules rather than capital gains, similar to how foreign currency transactions up to $1000 are exempt from reporting.
Savings Account Exemption:
Consider exempting Bitcoin held in personal accounts from capital gains treatment, recognizing its function as digital savings rather than investment speculation.
De Minimis Threshold:
Establish meaningful transaction thresholds below which Bitcoin transactions are not taxable events, enabling practical use as money.
Inflation Adjustment:
If gains treatment continues, adjust the basis for inflation to tax only real economic gains rather than nominal dollar increases caused by currency debasement.
Competitive Advantage for State
Innovation Leadership:
States and districts that embrace sensible Bitcoin policy will attract the digital economy’s most innovative companies and highest-skilled workers.
Economic Development:
Clear, favorable Bitcoin regulations will position your constituency at the forefront of the digital monetary transition, creating jobs and economic opportunity.
Constituent Wealth Preservation:
Enabling your constituents to protect their savings through Bitcoin will help them maintain financial security in an inflationary environment.
The Bottom Line
Even your constituents that are seeking to “get rich” through Bitcoin - are taking actions to help them stay financially whole. You cannot stop federal debasement of the US Dollar, but you can help ensure that your constituents are encouraged to better weather that storm, regardless of which motivation led them to the strongest shelter.
Remove capital gains taxation on Bitcoin, and you pave the path to a more sovereign constituency. Current tax policy punishes them for making responsible savings decisions and forces them to choose between preserving their purchasing power and avoiding complex tax complications.
Legislation that treats Bitcoin as the digital savings account it offers will serve your constituents’ financial interests, promote American leadership in digital monetary technology, and align tax policy with economic reality.
I urge you to champion legislation that stops penalizing prudent savers and recognizes Bitcoin for what it fundamentally is: a superior form of digital savings that protects working families from monetary debasement.
Thank you for your consideration of this critical issue affecting your constituents’ financial wellbeing.
Respectfully,
[Your Name]
[Your Title/Credentials]
[Contact Information]
