

New Hampshire Bill Backs Bitcoin for State Taxes - jordanmessina
http://panampost.com/belen-marty/2015/02/04/new-hampshire-bill-backs-bitcoin-for-state-taxes/

======
chimeracoder
I grew up in New England, so I can provide a bit of relevant context:

New Hampshire is a very quirky state, politically, in a number of ways. In a
sense, New Hampshire state government looks a lot more like city-level or
county-level government in many other states.

Compared to other states, state representatives are far more likely to
"average citizens" instead of career politicians - just everyday people who
have decided to do as single term in state government, and have little to no
plans to run again. This is very frustrating for the leadership of both
chambers, since it makes it very difficult to whip votes! On the other hand,
it arguably makes it easier for elected officials to buck party lines and vote
their conscience, if they so choose.

In addition New Hampshire does not (last I checked) have direct-vote ballot
initiatives the way California does, but it does make it much easier for
citizens to propose legislation. Whether or not this legislation gains
traction or actually passes is a separate matter. Look no further than the
long history of repeated attempts at marijuana policy reform in NH to see just
how difficult it can be to predict which bills will end up gaining
traction[0].

As a result, it's very common to see bills that are proposed and supported by
a small contingent of backers, but never end up going anywhere. This bill may
or may not end up passing, but just keep this context in mind whenever you
read news about a bill being brought to the NH legislature with only a handful
of supporters.

[0] This issue is actually a particularly fascinating case study in NH
government, because NH is a very libertarian-leaning state, and it baffled
reform advocates for the longest time that they had such difficulty in getting
NH to pass relatively uncontroversial reform measures.

~~~
skwirl
New Hampshire has one state representative per 3,291 citizens, which means
each representative is being elected by an extremely small electorate. This is
the smallest in the country. The US average is one state representative per
60,000, and the largest, California, is 465,674 people per representative.

The state is also subject to huge rapid swings in the majority. In 2008
Republicans won 43.5% of the seats, in 2010 Republicans won 72% of seats, in
2012 they won 45% of the seats, and in 2014 they won 60%.

While you could certainly argue that there are some benefits to this system,
This American Life had a good episode on some of the cultural problems that
this system has led to (see Act 2) - [http://www.thisamericanlife.org/radio-
archives/episode/478/r...](http://www.thisamericanlife.org/radio-
archives/episode/478/red-state-blue-state)

------
jMyles
Reminder: New Hampshire Porcupine Festival is one of the best technology
events of the year in the USA. Tech talks, hackathons, firing guns w/
3D-printed magazines, homeschooling, mesh networking, all sorts of drones /
FPV vehicles, and on and on. And you can buy just about anything with
cryptocurrency, from organic vegetables to an AR-15.

If you haven't been, it's really a must-see phenomenon.

[http://porcfest.com/](http://porcfest.com/)

~~~
kleer001
... and of course Bitcoin 101 is one of the first talks, right after "Outdoors
safety". Oh man, wish I could go, wrong part of the world for me.

~~~
jMyles
Also, the 'official' schedule is only the 4 main tracks (plus music and kids
activities, etc). In addition, there are several DIY tracks at the various
camps, including the "Alt Expo," which has many of the more advanced tech
talks (about a quarter mile from the main pavilion as the quadcopter flies).

There was also a 'pirate tent' which had a PGP-keysigning / local beer
exchange party that was absolutely over-the-top.

Dozens of - probably over a hundred - NH beers (many of which were single keg
or smaller) for trade only (no money exchanged hands) and a pretty serious PGP
web. Quite a freaking sight.

June can't come quickly enough! :-)

I'll actually have a newborn at that time, so I'm not 100% sure of my ability
to go this year.

~~~
A_COMPUTER
I have thought about going for years. But now that you mention PGP-keysigning,
that's clinched it. I had no idea. I guess that's not the sort of thing you
put on a normal flyer.

------
intopieces
Would Bitcoin be stable enough to accept and maintain? Serious question. It
seems like the state would have to immediately exchange the Bitcoins for
dollars, which costs money and would have a very specific impact on the market
(maybe that's the point?).

~~~
sp332
I suspect they would cash out immediately. After all the taxes are denominated
in USD. The article mentions that the state wouldn't pay any fees though,
that's the part I'm really curious about.

~~~
dragonwriter
The bill specifies that the plan must include the use of "an appropriate third
party payment processor that will process bitcoin transactions at no cost to
the state."

This doesn't mean that there would be no fees, it means that the payment
processor could only charge fees to the taxpayer, not the State.

~~~
celticninja
BitPay currently offers this to merchants and non profits so it may not be
that much of an ask.

------
forgottenpass
I don't see how this doesn't cost us money unnecessarily, otherwise I wouldn't
really care one way or another if we start accepting internet fun bucks.

The State is still going to do business in USD; looking at the volatility of
USD/BTC exchange rate, exchange fees and infrastructure/training, I don't see
how this is anything but a loosing proposition.

~~~
dragonwriter
> I don't see how this is anything but a loosing proposition.

Its a winning proposition to the third-party payment processor mandated to be
contracted by the bill, and -- presuming the method of accepting bitcoins is
that the payment processor takes bitcoins and provides the state with USD --
its not a losing proposition for the State so long as the bitcoin costs are
set at a level such that the state always gets the full USD value of the taxes
and fees.

I don't see how its really a losing proposition.

~~~
tw04
So what happens when there is a massive fluctuation in price and that third-
party payment processor declares bankruptcy? It's not like this is being
backed by a major financial institution.

We're talking about a currency that could lose half it's value in a matter of
hours. And when their total tax revenue is $3.2 BILLION, what third party
processor is going to be able to soak up the potential losses?

~~~
EricSchleien
Q: "So what happens when there is a massive fluctuation in price"

A: Nothing, as all bitcoins would be instantly converted into US Dollars
removing all currency volatility risk. I directly made sure that was in the
bill to address that concern.

Best, Rep. Schleien Prime Sponsor of New Hampshire House Bill 522

~~~
JoeAltmaier
What can 'instantly' possibly mean in this context? The same day? minute?
millisecond? Triggered by how big of a change?

~~~
celticninja
Using a payment processor like BitPay would allow this. Essentially you click
to pay in bitcoin, you redirect to the BitPay site, you pay them bitcoin and
they transfer the USD value to the recipient (in this case the state).

So an individual could pay $10k in bitcoin and the state would receive $10k in
USD. BitPay currently offer their service for free that would meet these
requirements.

[https://bitpay.com/pricing](https://bitpay.com/pricing)

so to answer your question instantly means instantly.

~~~
tw04
So who is giving BitPay cash for the coins instantly? Are there literally buys
just chomping at the bit, even when the market is in a downward trend, to buy
coins from BitPay, for cash, _instantly_ after they put them up for sale? At
some point the piper has to be paid, and if it isn't a large financial
institution, I'm still not seeing how this plays out. There has to be someone
to soak up the massive loss in value...

As far as I can tell, BitPay has less than $100 million in investment, I don't
see how that even comes close to covering the risk.

~~~
celticninja
Bitpay uses exchanges such as Bitstamp to sell the coins immediately. There
are plenty of buy orders there to cover these purchases. Note that this
doesn't mean every tax bill is due to be paid by bitcoin but individuals could
if they wanted to.

Perhaps you are unfamiliar with bitcoin, I'm not sure. For every seller on a
exchange there is a buyer. Yes if there happened to be a flash crash this may
be an issue but generally this hasn't been a problem. As an example, bitpay
will lock in the dollar value for a 10 minute period, as long as you pay in
that window they guarantee the retailer the USD value and the buyer the BTC
price. To achieve this they would keep some funds in btc all the time, then
when a sale like this comes in they sell the equivalent amount (or a part of
it) to hedge against future fluctuations.

I think you are thinking that the states entire tax revenue would come via
this method, currently I doubt there are enough BTC in that state to achieve
that outcome. But anyway this proposal is feasible as it currently stands.

------
EricSchleien
It has just been announced that the hearing for this bill will be on February
12, 2015 @ 11:30 AM EST at the NH Legislative Office Building in Room 2002

If any of you would like the opportunity to speak on behalf of this bill --
your help would be welcome!

------
jordanmessina
Link to the bill:
[https://legiscan.com/NH/text/HB552/2015](https://legiscan.com/NH/text/HB552/2015)

------
dyeje
What's the benefit? It seems like it would just add more complexity to the tax
process and therefore increase the cost of the entire process.

~~~
EricSchleien
Benefit:

Less Costs to the State (lower transaction fees) + $0 set up fee. More secure
than credit card transactions.

Safer/More Secure + Cheaper = Benefit

\---

And yes completely constitutional. Nobody is issuing currency. It's simply
providing a means of payment that is getting converted into US Dollars through
a third party payment processor. BitPay was mentioned as a company that
provides those services above.

Hope this clarifies.

Eric Schleien Prime Sponsor

------
tedchs
IANAL... is this even legal given that the US Dollar is the only official
currency of the United States?

~~~
dnautics
the hilarious thing is that it is TOTALLY unconstitutional.

Article 1 section 10 provides that "No State shall... make any Thing but gold
and silver Coin a Tender in Payment of Debts."

Of course, striking down the act by virtue of its violation of this provision
would also expose the fact that dollars are no longer gold and silver, either,
and thus are also unconstitutional as legal tender for the states.

~~~
zyxley
But the state isn't making Bitcoin legal tender, and states don't make dollars
legal tender, either.

"Legal tender" is something that can be used to pay debts and that a creditor
is legally required to accept. Dollars being legal tender is something
instituted by the federal government.

States, on the other hand, must accept dollars to pay state taxes (as that's
legal tender), but they can also accept anything else they like in lieu of
dollars (if both the state and the person paying taxes agree on this alternate
payment), whether that's Bitcoins, chickens, or performances of the Thriller
dance.

~~~
dnautics
I stand corrected, but will keep the karma points.

------
bubbleRefuge
There is a big body of literature demonstrating how the value of money is
derived from the state's ability to levy and enforce taxes[1]. In fact, this
is the basis of most sovereign currency regimes with floating fx. In these
regimes, governments issue currency out of thin air and levy taxes to force
its ubiquity. However, at the U.S state level(CA,FL,TX,etc) and in the case of
the Euro(France,PIGS,etc)at the national level, these entities are constrained
by tax revenue and ability to borrow same as a household or business. Thus,
instead of bitcoin, which is backed by nothing, why not have states issue
their IOU's to pay state liabilities but also accept those IOU's to retire
liabilities to the state. Naturally, this idea is in lieu of federal aid which
has been withheld to states because of austerity politics.

[1] [http://neweconomicperspectives.org/2011/06/modern-money-
theo...](http://neweconomicperspectives.org/2011/06/modern-money-theory-
primer-on.html)

------
jcpham
It's probably a bit too soon for something like "pay my taxes in bitcoin"...
but ultimately a government transacting in a transparent fashion such as this
_MUST_ be a step in the right direction? No?

~~~
knd775
I don't believe this would add transparency. All they would likely do is
immediately exchange it for USD. I don't think they would keep it in a wallet
where we could keep track of their expenditures.

~~~
greggyb
What follows is unlikely:

If the majority of taxpayers were to pay in Bitcoin, revenues would be
transparent, which is a step toward a free and open public audit of budgets.

~~~
jbooth
You know that you can get the NH budget and audit it yourself, right now,
right?

~~~
greggyb
Free and open were the key points. Since the transactions are public they are
independently verifiable. I am not accusing the state of lying or fraud, but
this would be a check on that possibility.

Again it is not likely that Bitcoin would ever make up enough of the tax
revenue for the thought to even be relevant. It was only in response to the
transparency question.

------
fnordfnordfnord
Someone could create a POS machine that rendered taxes directly to the state
at the time of sale or in batches. Also people could discover a company's
sales figures by watching the blockchain.

~~~
celticninja
You could see how much was being paid to the state but not by whom. This adds
transparency at the state level as payments would be made to a known address,
however where the payments are from would be anyone's guess.

~~~
fnordfnordfnord
I think you could figure it out pretty quickly by tracking/making your own
purchases.

~~~
celticninja
Not if the merchant give each buyer a new bitcoin address (best practice), did
not store all their bitcoin on a single address (best practice) and used any
sort of exchange to hold coins at any point (common practice) all of these
would obfuscate the merchants actual holdings, sales etc. Enough so that it
would be difficult for a competitor to track you accurately enough for it to
be worth the effort. Plus if they did have any other bitcoin income or savings
it would cloud the situation even further.

Once you are one step (transaction) away from the known address i.e. The one
you sent coins to in order to track them, you have no way of knowing or
proving that the merchant controls any subsequent address.

If for example bitpay handled their transactions you would see funds sent to
bitpay, if the merchant kept 100% in btc but only got paid out by bitpay
weekly then how do you know what was sent to the merchant?

------
shittyanalogy
Can state taxes currently be pain in New Hampshire with anything other than
USD?

------
runeks
The right way to do it, as far as I can see, is to allow people to report
their taxes in whichever form of money they prefer. US Dollars, Euros, gold
would all be a valid numeraire to use when reporting your current assets and
income to the IRS. And the currency you choose to report your taxes in, is the
currency you pay taxes in.

This is just currency competition. Nothing more than that. The ability to
freely choose which currency you want to use to measure value.

Whether bitcoin should be considered alongside dollars, yen and silver is an
open question. If people are allowed to report their taxes in bitcoins, they
can really shoot themselves in the foot. But, personally, I'm generally
speaking not in favor of the government preventing people from shooting
themselves in the foot.

Say, for example, I choose to report my taxes in bitcoins. I currently hold 10
bitcoins and $1,000. Later, the price of bitcoins in dollars (BTCUSD) falls
from 225 to 50. This means that one dollar is now worth 1/50 bitcoin instead
of 1/225 bitcoin. I then buy 20 bitcoins using the $1,000, and -- because I
report my taxes in bitcoins -- it means I've realized a capital gain of
($1,000×(1/50) - $1,000×(1/225)) = 20 BTC - 4.4444 BTC = 15.5556 BTC, on which
I pay capital gains tax. The _bitcoin value_ of my dollars has increased
(before 1/225 bitcoin per dollar, now 1/50 bitcoin per dollar), so I have to
pay bitcoins to the IRS if I convert dollars into bitcoins, after the bitcoin
price falls.

This just shows that bitcoin really isn't ready to be used as proper money.
Proper money is a money you would report your taxes in. Bitcoin just isn't
stable enough in value yet.

~~~
kej
Why would the state want to take on the complexity of dealing with the
situation you described, just to encourage "currency competition"?

~~~
runeks
I don't think the complexity would be that great. It's not like different tax
rules apply, it's just a different numeraire. Now, remember, people reporting
their taxes are not forced to change anything, they are just given the
opportunity.

I guess the basic reason I promote currency competition is that I think people
have the right no use whichever money they prefer. And in order to not give
preference to the national currency, produced by the central bank, it must be
possible to report ones taxes in another currency/money.

