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Arizona Considers Allowing Residents to Pay Taxes In Bitcoin

In a bid to attract businesses involved in blockchain and cryptocurrencies, Arizona lawmakers have proposed a bill that would allow the state’s citizens to pay their taxes in Bitcoin.

Arizona State Rep. Jeff Weninger, who introduced the bill, said it was a signal to everyone in the United States, and possibly throughout the world, that Arizona was going to be the place to be for blockchain and digital currency technology in the future.

Weninger, a Republican, also cited the ease of making online payments through the cryptocurrency “while you’re watching television,” as another reason. But he did not divulge much detail about the implementation of such a system.    

That might be the reason why Weninger faces an uphill battle in getting the bill approved by the state legislature. Bitcoin’s price volatility is already being cited as a possible roadblock to implementing such a measure by state legislators.

Arizona state senator Steve Farley, a Democrat who’s running for governor, said the bill puts the “volatility burden” of bitcoin’s price on taxpayers who make payments in U.S. dollars. “It would mean that the money goes to the state and then the state has to take responsibility of how to exchange it,” Farley said.    

Experiments In Paying Taxes With Bitcoin 

Even though governments around the world have discussed bitcoin regulation, none have used it for a full-scale experiment in taxation. Some municipalities in Switzerland, which has legalized bitcoin as tender and is reinventing itself as a haven for cryptocurrencies and blockchain, allow small tax payments in bitcoin. (See also: Why Is Switzerland Bullish on Crytocurrencies?)

The country’s Chiasso municipality announced last year that it would allow residents to make tax payments of up to 250 Swiss francs (about $267) using the cryptocurrency. The affluent Swiss city of Zug, which bills itself as “Crypto Valley,” allowed its citizens a limit of 200 francs in bitcoin payments for taxes while conducting a similar experiment in 2016. Japan does not allow tax payments in bitcoin despite legalizing the currency last year. 

In the United States, the New Hampshire House of Representatives defeated a bill that proposed similar payment mechanisms in 2016. If passed, the initial part of tax payments would have been implemented with a bitcoin payments firm responsible for processing the transaction. 

Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin. 

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