Bitcoin Tax Strategies For A Runaway Fiscal Train

Lyn Alden, author of Broken Money, has made a strong case for fiscal dominance—the idea that government spending dictates monetary policy rather than the other way around. Her now-famous meme, Nothing stops this train, encapsulates the relentless trajectory of government debt and intervention. But what if something—however unlikely—could slow the train down?

Enter austerity. Not that it’s necessarily achievable in any meaningful sense, but for the first time in years, it’s being hinted at. Markets are adjusting, not because they believe it will happen, but because they’re starting to wonder if policymakers are actually serious. With the shakeup brought by Trump, Musk, and recent USAID revelations, the conversation has shifted. For the first time in a long time, there’s uncertainty around whether fiscal dominance can continue unchecked.

When a country is drowning in debt, policymakers have four main levers they can pull:

1. Inflation: Quietly eroding debt (and savings) by making every dollar worth less.
2. Economic Growth: Expanding the tax base and hoping for a productivity boom.
3. Debt Restructuring or Default: A mix of extending, renegotiating, or outright not paying back creditors.
4. Austerity: Cutting spending and increasing taxes—whether people like it or not.

For years, the austerity lever was a joke. Now? It’s at least part of the discussion – and likely part of a blended approach. And if the season of fiscal dominance continues, tax policy will be the first place where real, actionable changes show up.

For bitcoin holders, this isn’t just another macro shift to passively observe. Unlike inflation or debt restructuring—forces that are largely out of individual control—a tax policy change is one area where proactive planning can actually make a difference in your financial life. The right strategies could turn coming changes into opportunities rather than financial landmines.

Five Possible Taxation Scenarios for 2025

With fiscal dominance running the show, tax policy is in flux. The next 6-12 months will likely land in one of these five tax regimes—each with distinct implications for bitcoin holders.

1. TCJA Sunset (5% Probability)

The Tax Cuts and Jobs Act (TCJA) sunsets, and Congress does… nothing. Income taxes jump, estate tax exemptions shrink, and capital gains get more expensive. The bureaucratic equivalent of ghosting your tax bill.

2. TCJA Extension (10% Probability)

Congress extends the existing tax cuts without any new bells or whistles. A true “kick the can” move, leaving the current framework in place for a few more years.

3. TCJA Extension with Adjustments (70% Probability)

This is the base case: TCJA remains, but with modifications. Trump has hinted at eliminating taxes on tips, removing taxes on Social Security benefits, exempting overtime pay, and allowing deductions for auto loan interest on American-made cars. Additional incentives for domestic production, such as reducing the…