Colorado Crypto Tax Plan: A Small Step, But a Big Idea

Imagine paying your taxes with Bitcoin! In September 2022, Colorado made headlines by becoming one of the first U.S. states to let people pay their state taxes with #cryptocurrency. This included everything from income tax to sales tax. It looked like a bold jump into the future of money.

But nearly two years later, how is it going? The numbers are pretty interesting.

Even though it was a big announcement, not many people are using crypto to pay taxes in Colorado:

• Only 78 crypto payments have been made by the end of 2024.

o 8 in 2022

o 22 in 2023

• The total money collected through crypto? Just $57,211.

To give you an idea, Colorado collected about $11 billion in regular income tax in one year alone. So, crypto payments are a tiny, tiny fraction – like a grain of sand on a huge beach – of the state-s total money.

There are a few reasons why this cool idea has not taken off more widely:

• Payment Rules: You have to use PayPals crypto service, and it only works for personal accounts through their mobile app. It is not super straightforward for everyone.

• Businesses Cant Use It: If you are a business, you cant pay your taxes with crypto through PayPal Business accounts. This limits who can use it.

• Extra Fees: Crypto payments come with a service fee ($1 plus 1.83% of the amount). This might be more than people want to pay.

• Price Swings & Newness: Some people worry about crypto-s price going up and down a lot. For others, it is just too new or confusing.

It is worth noting that Ohio was actually the first U.S. state to try accepting crypto for taxes back in 2018. But they stopped their program after a short time.

Colorado, led by Governor Jared Polis (a big fan of new tech), is still committed. A smart move by the state is that they do not actually hold the crypto. A third party immediately changes it into U.S. dollars. This protects the state from crypto-s price changes while still offering a modern payment option.

Governor Polis has even hinted at letting people use crypto for things like driver-s licenses, but those plans haven-t happened yet.

Colorado-s effort is part of a larger trend. Many states are looking into how #blockchain and digital money can be used:

• Florida, Hawaii, and Utah have groups studying blockchain.

• Arizona, California, and New York have thought about using crypto for fines or other government payments.

• Even at the national level, both recent U.S. Presidents have shown interest in how digital money will work.

Colorado-s crypto tax program might not be popular right now, but it is a symbolic step forward for how governments handle money in the digital age. It shows that states can be brave and try new things to modernize.

Will more states follow? Will more taxpayers eventually use crypto for taxes? We will have to wait and see. But one thing is clear: Colorado-s interest in crypto is helping to shape how we might pay taxes in the future.

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