United States President Joe Biden has expressed his strong opposition to a debt ceiling deal proposed by Republican leaders, arguing that it would disproportionately benefit "wealthy tax cheats and crypto traders" while endangering vital food aid programs.
Making his stance clear at a press conference during the Group of Seven (G7) summit in Hiroshima, Japan on May 21, President Biden referred to the Republicans' proposed terms as "unacceptable."
Clash Over Tax Loopholes and Revenue Generation Measures
The heart of the contention lies in the purported protection for crypto traders through tax loss harvesting.
Discussions between the White House and Republican leaders have centered around the possibility of blocking this mechanism for cryptocurrency transactions. Tax loss harvesting is a strategy employed by investors to reduce their overall tax liability.
It involves selling cryptocurrency at a loss in order to offset capital gains from crypto profits. To claim a loss, the property must be sold, and the proceeds must be utilized to purchase a similar property within a 30-day window before or after the sale.
This mechanism is also applicable to shares and other assets. Furthermore, the White House has put forth a similar proposal to Republicans, aiming to prohibit investors from deferring taxes on real estate swaps. These changes, if implemented, would contribute approximately $40 billion in tax revenue for the US government.
Breaking🚨: President Joe Biden speaks on the final day at G7 summit.
“I am not going to agree to a deal that protects wealthy tax cheats & crypto traders while putting food assistance at risk”. pic.twitter.com/hiP7ysmfIy — KoinX (@getkoinx) May 22, 2023
Ideological Divide and the Looming Threat of Bankruptcy
However, the Republican party has rejected these proposals.
House Speaker Kevin McCarthy asserts that the escalating US debt is primarily a "spending problem, not a revenue problem," pointing to the Biden administration's excessive expenditure during the pandemic as evidence. Conversely, the White House attributes the debt crisis to the tax cuts implemented by previous administrations, claiming that these reductions have significantly impacted revenue generation.
In an attempt to address the deficit, Republicans are advocating for $4.8 trillion in spending cuts, a measure that would directly impact the budgets of federal agencies. If Congress fails to raise the debt ceiling, the United States faces the imminent risk of bankruptcy, as early as June 1.
President Biden is expected to hold a phone conversation with House Speaker McCarthy during his flight from Hiroshima to Washington, D.C., as both parties seek to find common ground. The debt ceiling, in effect since 1917, serves as a limit imposed by Congress on the amount of money the federal government can borrow in order to meet its financial obligations.
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