New York State Assemblymember Phil Steck’s proposed tax on crypto transactions will not be modified to accommodate stablecoins’ use in everyday payments, the lawmaker told Decrypt.
“I don’t think that there should be some exemption from a tax on crypto if you buy it for the purpose of using it as a currency,” he said on Tuesday. “I can’t see, frankly, crypto being used to take the place of the dollar bill in everyday transactions.”
Last week, Steck estimated that a 0.2% tax on crypto transactions in the Empire State would generate $158 million annually, which could go toward helping schools combat substance abuse in upstate New York by funding the expansion of an existing support program.
“We thought this might be a way to raise the money needed to make this a statewide program,” he said, noting that the state’s Office of Alcoholism and Substance Abuse Services currently serves communities in New York City and has faced budget constraints.
Crypto advocates should support what appears to be a painless way of raising money to help those in need because it would “show their commitment to doing something positive for the public,” the 66-year-old lawmaker said.
Not all cryptocurrencies are the same, but digital assets are mostly speculative and resemble a form of entertainment, Steck said. And when Steck wants to watch professional baseball, he has no problem with paying a 4% sales tax on Mets tickets.
Steck’s bill would go into effect immediately if passed, and it comes as stablecoin legislation is expected to unlock more competition in the $280 billion sector, from the likes of Bank of America to Citigroup, following the passage of the GENIUS Act last month. But at least one observer has raised concerns that the bill would penalize consumers for transfers between their own accounts that incur no profits. These movements are similar to those an individual would execute between a savings and checking account.
Stablecoins are often pegged to the U.S. dollar and backed by a mix of cash and U.S. Treasuries. Some regulators have compared them to poker chips in the past because crypto traders primarily use them primarily as a way to swap out of relatively volatile assets.
Steck’s bill could make a positive impact upstate, but it’s unclear how a 0.2% excise tax would play out in the epicenter of the financial world.
Steck said his legislation would not include exemptions for high-frequency traders, who can execute thousands of transactions in a second while using complex computer algorithms to capitalize on the smallest changes in markets.
“I would see taxing high-frequency trading as very advantageous because [many economists] do not consider that to be productive economic activity,” he said. “It’s not for investment purposes. It’s essentially a form of gambling.”
Steck has meanwhile called for the reinstatement of a state tax on stock transfers. New York collected a 5-cent fee on sales over $20 from 1905 to 1981.
It’s possible that Steck’s $158 million revenue estimate is low. His team tried to get information on the volume of crypto transactions in New York from the state’s Department of Financial Services, but a bill memo shared with Decrypt notes those efforts were unsuccessful.
Under the bill’s plain text, crypto users would be taxed for moving funds between accounts they own, a non-event from the perspective of federal tax, Nick Slettengren, co-founder and CEO of Count on Sheep, a tax preparation service, told Decrypt.
“Unless regulations carve it out, [the bill] would penalize basic security hygiene and bookkeeping,” he said. “That’s a recipe for confusion, over-collection, and disputes.”
Steck isn’t the only one turning to crypto to help fund schools. Wyoming debuted its Frontier Stable Token (FRNT) on Tuesday, becoming the first state to issue stablecoin, and revenue generated by the token’s reserves will go toward the state’s school foundation fund.
Asked for his thoughts on FRNT, Steck said “they’re going to have to pay a lot of money to create that currency digitally, which is very expensive from the point of view of using energy.”
The lawmaker did not appear to know the difference between proof-of-work or proof-of-stake, or that Bitcoin’s energy consumption is massive compared to other networks, including the seven blockchains that Wyoming’s stablecoin debuted on earlier this week.
So far, Steck said he hasn’t had the opportunity to gauge assemblymembers’ thoughts on the crypto tax. Not only was the bill just introduced, but he said that the New York legislature will not be in session until January.
