A motion graphic explains what Bitcoin is and how Bitcoin works.
Keith Carter and Ashley M. Williams, USA TODAY Network
Arizona could become the first state in the country to accept payments from the volatile Bitcoin digital currency for taxes, thanks to a bill advancing through the Legislature.
Sen. Warren Petersen, R-Gilbert, is sponsoring Senate Bill 1091.
The bill would allow income taxes to be paid in Bitcoin or other cryptocurrency approved by the Arizona Department of Revenue starting in 2020.
The revenue department would be required to convert such payments to U.S. currency at the prevailing rate, crediting the taxpayer’s account with the converted dollar amount. Therefore, any swing in price that resulted in the state not getting the full payment would be the responsibility of the taxpayer.
It passed the Senate Thursday and has moved to the House for consideration.
Scot Mussi of the Arizona Free Enterprise Club and Jonathan Paton, a 2012 congressional candidate, support it, while dozens of Arizonans have registered their opposition to the bill.
Bitcoin is a digital currency, or “cryptocurrency” that allows people to pay for goods or services with their Bitcoins without using a bank or credit card. People can buy Bitcoins, maintain them on a smartphone or computer, and transfer them instantly to others.
The Bitcoin phenomena experiences both record highs and lows this week, but…uhh, what the heck is it again?
Concerns about proposal
The value of Bitcoins has swung wildly in recent months. For example, on Nov. 6 the value was $5,878. On Dec. 11 it was more than $19,000. It was at $8,553 Friday.
Sen Steve Farley, D-Tucson, shared his concerns before the Senate approved the bill Thursday.
“The state Department of Revenue is having a hard enough time doing its job with the cuts that have been made to auditors collectors and other people like that,” Farley said. “To give them another task is a difficult thing to do.”
He pointed out the volatility of Bitcoin.
“What this does in effect is transfer the volatility risk off the person paying their taxes and onto the Department of Revenue and thus all other taxpayers,” Farley said. “We take American dollars at the Department of Revenue to pay taxes. I think American dollars ought to be good enough.”
The implementation date is not until 2020, which would give the Department of Revenue time to determine which currencies it will accept and how it will make the exchange to U.S. dollars.
Petersen said because the Revenue Department will only credit taxpayers the value of the Bitcoin after it’s converted to dollars, there is no risk to the state.
“Even if for some reason the state doesn’t receive what was sent, the state will only credit you with what is received,” Petersen said.
Petersen said Farley was only telling one side of the story.
“What the good senator failed to mention, it is true that it has dropped … he forgot to mention it’s gone up 4,000 percent,” Petersen said.
Barrow Neurological Foundation receives its first donation in the form of digital currency to further memory research.
Options for taxpayers
At a Jan. 24 Finance Committee hearing, Petersen said the bill was needed to give taxpayers options.
“This is all about ease and convenience,” Petersen said. “Here in government, we are here to serve the people.”
He strongly defended the bill at that meeting against critics.
“Some of the people saying this is dumb are the same kind of people when the Internet first got going would say it’s dumb,” Petersen said.
The currency was at about $11,000 when he made those comments.
At the same hearing, Karen Fann, R-Prescott, read a comment she received about the bill that suggested it would affect the state’s “cash strapped revenue system.”
“That’s an ignorant comment,” Petersen replied.
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