Bitcoin Tax Payments Could Boost US Economy by $14T

The Bitcoin for America Act, introduced on November 20 by Representative Warren Davidson, represents a fundamental shift in how the United States government interacts with digital assets. The legislation would allow taxpayers to voluntarily settle federal tax liabilities using Bitcoin while directing every incoming coin into the Strategic Bitcoin Reserve established earlier this year by executive order. Davidson stated that “The Bitcoin for America Act will position our country to lead—not follow—as the world navigates the future of sound money and digital innovation,” framing the proposal as essential for maintaining American competitiveness in the evolving global financial landscape.

The bill’s mechanics eliminate capital gains recognition on Bitcoin tax payments, addressing a critical barrier under current rules that often forces holders to sell their appreciated Bitcoin for dollars before paying the IRS. This structural change enables individuals and businesses to remit Bitcoin directly to the Treasury without triggering taxable events, creating a seamless channel for Bitcoin to flow into government reserves. The Treasury Department would work with regulated financial institutions on custody, settlement, and cold-storage operations while recording taxpayer payments at fair market value for liability satisfaction.

This proposal builds upon the federal framework established in March, when the White House ordered all seized Bitcoin to be consolidated into a dedicated reserve and placed non-Bitcoin assets into a separate digital stockpile. That earlier move ended years of government Bitcoin auctions and shifted toward an accumulation structure rooted in forfeiture flows. Current data from Bitcoin Treasuries shows that US federal entities already control approximately 326,000 BTC following enforcement actions and asset recoveries.

The Bitcoin Policy Institute, which has endorsed the legislation, released comprehensive modeling showing how Bitcoin tax payments could build a substantial reserve through steady annual inflows. With federal receipts totaling approximately $5.23 trillion in fiscal year 2025, if just 1% of nationwide taxes were remitted in Bitcoin, annual inflows would reach roughly $52.3 billion at current revenue levels. Depending on average Bitcoin prices across the period, this translates to hundreds of thousands of coins accumulated per decade.

The modeling reveals that a ten-year horizon at 1% adoption would produce between 350,000 and 700,000 BTC added to the reserve if Bitcoin averages between $75,000 and $150,000. Higher adoption levels scale linearly, with a 5% scenario potentially producing about 1.7 to 3.5 million BTC across the same price range, though the institute acknowledges that liquidity constraints would likely influence prices in practice. The most striking projection comes from the 20-year scenario, which assumes constant adoption, stable cost basis, and no reflexive price effects from federal buying pressure.

Under this long-term model, 1% adoption from 2025 through 2045 would yield more than 4.3 million BTC with an implied base-case terminal price of approximately $3.25 million per coin. The institute calculates a net advantage nearing $13 trillion compared to keeping the same flows in cash equivalents. This upper-bound combination reflects the compounding effect of long-term holding in a reserve that does not sell any incoming Bitcoin, creating what supporters frame as a balance-sheet hedge against dollar liabilities.

The proposal arrives against a challenging macroeconomic backdrop, with federal deficits remaining elevated and fiscal year 2025 ending near a $1.8 trillion shortfall on $5.23 trillion in revenue, according to Congressional Budget Office data. Interest costs remain high relative to historical norms, making the potential for non-yielding assets like Bitcoin to serve as a hedge increasingly attractive to some policymakers. The executive order establishing the Strategic Bitcoin Reserve described it as a long-horizon repository, drawing parallels to how sovereign nations manage gold stockpiles rather than short-term liquidity positions.

Operational execution under Davidson’s proposal requires significant Treasury Department overhaul, necessitating sophisticated intake systems that timestamp prices, manage refund protocols for intraday volatility, and enforce sanctions screening on incoming UTXOs. These technical mandates, which include aligning multi-signature governance with federal cybersecurity standards, complicate revenue scoring for budget analysts by removing the taxable events usually triggered when holders sell Bitcoin for dollars.

Beyond internal logistics, the sheer scale of potential Bitcoin inflows introduces volatility risks to broader market structure. At 1% adoption, the government’s annual Bitcoin intake would approach the volume of spot-exchange turnover during quiet periods, and higher participation rates would push flows toward the level of daily net issuance. This persistent accumulation could tighten free float during bull cycles and widen spreads if buyer profiles become predictable, challenging the Bitcoin Policy Institute model’s assumption that federal sourcing will have no reflexive impact on price.