Lawmakers Trying to Head Off Massive Taxation

An anonymous reader writes to mention a Reuters article about a lawmaker's attempt to stop the Government's interest in taxing Massively Multiplayer Game content. R-New Jersey Jim Saxton is cautioning against exploring the taxable status of in-game items. From the article: "'The goal of the forthcoming Joint Economic Committee study is to help lawmakers understand the issues involved and head off any premature attempt to impose a tax on virtual economies,' he said. Under current law, Saxton said if a transaction takes place solely within a virtual world there is no 'taxable event.' Dan Miller, chief economist for the Joint Economic Committee, said earlier this week that the committee's study would start with a blank slate and be completed by the end of the year."

So does this mean...

[the_skywise]

That if I get a monopoly in Monopoly(r) that my future games have to be government regulated?

That I have to declare income taxes on all cash received while playing PayDay(r)

That I have to declare my tax status to the IRS when I finish the game of Life(r) and retire?

Re:If I have 200 level 60 WoW characters

[Anonymous Coward]

They already do.

If you (in the process of violating the terms of service) sell virtual items on eBay, it's income, and you're obligated by law to report it on your filings at the end of the year.

This is hoopla about taxing in-game currency. Basically, every now and then some yahoo with an economics degree dips too deep into the bubbly, starts yammering about make-believe tax implications in gaming, and then everyone loses their head and screams "omgwtfbbq! they're gonna tax mah golds!" when, in reality, nobody is seriously proposing any such thing, there's nothing to tax, no tax law on the books supports such a move, and no court in the land would be idiotic enough to allow any legislation to change that last fact to stand.

Nothing to see here, move along. Politicians and overstudied nerds with too much free time is all.

Re:If I have 200 level 60 WoW characters

[Boogaroo]

Yes, but then it's real cash and a real transaction. Without a real-life transaction, it's worth nothing. You turn off your account and it disappears. Your house doesn't disappear when you move out, someone else gets it. It's real.

Re:No value?

[Nevyn]

If I die and leave a taxable estate, you can bet that the government wants their hands deep in my pockets to extract their pound of flesh, even if there is no actual money changing hands.

Just ask any farmer with land holdings.

There are significant limits that need to be reached before this happens. Even before Bush's proposed removal of the Estate Tax (this is in the millions [irs.gov]). Can you provide any actual evidence that farmer's are losing their land as it moves to the next generation (Bush talking points are not data).

The Estate Tax is one of the best progressive Taxes currently, removing it in favour of other taxes would be an insane gift to the very wealthy (no surprise Bush wants it).

Collateral - perhaps

[davidwr]

Suppose I'm in the business of making MMRPG items and selling them in the real world. I'm a very small business netting $5,000/month for the past year and a half after taxes.

I decide to expand. I could expand slowly, hiring one talented game-player then, when the business grew enough, another.

Or, I could go to a bank or to investors with a business plan to grow the business at the rate of 2 new player every month until I reach 20 players, then re-assess the situation.

Any lender or investor will want to know how much the business is worth. They will want to know all my in-game assets. A bank may loan me money only if I can put these assets up as collateral. In some cases, the company running the game may have to modify their terms of service for me in order to make this happen.

Revolution

[Zugok]

Taxation without representation [wikipedia.org]

Simple Solution!

[vertinox]

Just have your friendly GM go into the MMOG and magically make Gold just for the government.

Might be a problem with inflation if those IRS agents decide to buy mounts.

Re:If I have 200 level 60 WoW characters

[WillAffleckUW]

I think the Chinese Gold Farmers would disagree with you there. They make a lot from the equivalent of doing that.

That you choose not to do it for profit doesn't mean it can't be profitable.

Re:Yah know, they are actualy sorta right....

[Jonny do good]

If they tax virtual currencies then we should be able to deduct all of our expenditures on video games, computers, game consols, Internet connections, TV, Stereo, game controller, and any other equipment/services that we use to play the games. After all, we are using them in our own personal businesses in order to generate virtual money.

Re:No value?

[Nevyn]

The reason for opposing it is because the contents of the estate are assets that have been accrued AFTER taxes have already been taken.
...
the assets [are] double-dipped when the death bell tolls.

They aren't "double-dipped" they are taxed as they move from one person to another, like everything else (although Estate Tax is much less). If I earn $X, on which I paid Tax, if I buy something I pay Sales tax on it and if I pay someone to renovate my house I also pay taxes on that, and they pay income tax ... and no one is shouting "OMG tripple-dipping".

The same is true in the other direction, if you take your pay and buy dividend paying stocks you pay taxes on those (although Bush has brought out the "double-dipping" talking point here too, to lower that). If you buy something with your post-taxed income, and sell it later for more you again pay taxes.

From the Tax system's point of view, your death is just a large one off piece of income for someone else (although, again, often Taxed much less than regular income).

One of the ideas behind the Tax system, is that you convince people to do certain things with their money. So you do want certain "loop holes" in income tax, so that people use their income to invest in things to get more income ... like buy a house. This creates a stable economy. So although I agree in general that the wealthiest aren't paying as much as they should, removing all the loopholes so people's income couldn't grow easily would be a terrible idea (and if it can grow, then you need some way to make it go down again or the wealthiest get all the money).

Re:No value?

[aztec rain god]

I saw a really interesting interview with William Gates II, of all people, who is probably the most vocal proponent of the estate tax. The point that struck me was the whole issue of language, and how the republicans were winning the debate because of their use of the term "death tax". His proposal was to adopt a term akin to "grateful member of society" tax- the implication being that the condition of being born in a society with strong and stable institutions, whether in terms of the education system or the legal system or whatever, necessitates some compensation from those who reap the greatest reward from it. Anyone in a position to pay the estate tax who has the gall to openly complain about it should think long and hard about the society we have, and the condition in which most of humanity exists elsewhere.