Main menu

"Goodbye, Jean-Luc, I'm gonna miss you. You had such potential. But then again, all good things must come to an end."
- Q, Star Trek: TNG

Reuters: US Congress Launches Probe into Virtual Economies

by Ken Newquist / October 18, 2006

You've got an amazing island resort in Second Life. The entire virtual universe is clamoring to get in, you've got a buzz like no other, and you're raking in thousands of linden dollars a month. Meanwhile, in World of Warcraft you've got a nice little auction routine going, and have managed to accumulate quite a pile of gold.

But did you list that virtual property on your taxes? How about itemizing that pile of gold? Of course not you say, it's not real ... but the U.S. government isn't so sure. With online games like Second Life assigning real-world property rights to virtual world objects, and allowing for the exchange of in-game currency for out-of-game cash, the feds want to make sure they're getting a piece of whatever action they can grab.

This article on Reuters (from that aforementioned Reuters Second Life bureau) discusses what the Congress's "Joint Economic Committee" is looking at:

Right now we’re at the preliminary stages of looking at the issue and what kind of public policy questions virtual economies raise — taxes, barter exchanges, property and wealth,” said Dan Miller, senior economist for the Joint Economic Committee. “You could argue that to a certain degree the law has fallen (behind) because you can have a virtual asset and virtual capital gains, but there’s no mechanism by which you’re taxed on this stuff,” he said.

And people wonder why I'm one of those wild and crazy libertarians. Personally, I think this is stupid -- we don't need new law, because the old law will work just fine. If you "cash out" of Second Life, you'll need to pay taxes on what you made, but until then, it's just a simulation.

Blog Topic: 


Let me be the first to say: whaaaaaat?? oO

I can maybe see one's RL monetary gains from Second Life as being taxable. It's part of the design of the "game" itself, and a gain just as if one were selling the fruits of any hobby - crafts or whatever.

WoWarcraft, though?? The things I sell on the auction house are virtual, and I get paid in virtual gold. Is the gov't going to charge me a percent in virtual WoW gold? Weird. It's against the ULA of the game to sell accounts, characters, or any of the in-game objects for RL money, so is this really an endemic problem? Blizzard just canned 70,000+ accounts for gold farming, etc., so they are already self-policing, not to mention that most of the gold-selling businesses are not US-based anyway.

A busy gamer dad shares his thoughts on gaming, geek life, and other eclectic topics of the day.

Where Second Life blurs the line is offering an "exchange rate" for its currency (linden dollars) with real dollars, allowing money to move in and out of the game. But IMHO, as long as you're dealing with game currency, its really no different from paying more to upgrade The Sims with an expansion pack -- you're using money to buy more goods within the game.

I think the litmus test should be simple, and consistent with everything else -- when you cash out, you pay taxes on your income. One more argument for a flat tax IMHO (before you start having people taking deducations for losses made in games. :))