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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 long as you only look at those MMOs that the IG currency has an out of game (offical) value (IE 2nd life, Project Entropia), then you do have an actual sale going on....
I know NOTHING about taxlaws and strange things that have to do with interstate/country taxes, however If I were to look at this on the most basic level:
You have 2 people that live in the same state, and use a program like PE or 2nd live, that is based in said state. If there is a sale between these 2 people, shouldn't that be covered by local tax laws?
Do Or Do Not, There Is No Spoon, There Is Only Zuul. Everything in the above post is probably opinion.
Not that I want this to happen, but...
If the government can't get it's collective head out of it's ass to setup/allow for inter-state/inter-country taxation of goods & services; how do they EVER expect to tax imaginary items!
"The price good men pay for indifference to public affairs is to be ruled by evil men." ~Plato (427-347 BC)
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?
with lots of special armor - and I sell it to other players for real-world cash - I would HOPE that the IRS would come after me.
Let's get real.
-- Tigger warning: This post may contain tiggers! --
-my internet connection, my computer purchases, software purchases, etc???
every day http://en.wikipedia.org/wiki/Special:Random
The only things certian in Life are Death, Taxes, and Server Crashes. Second Life, that is.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
That's why you have to pull all of your money out of banks when you get sick enough and liquidat everything else. Cash is hard to trace as long as your heirs do not have an affinity for blind. It mean, it only makes sense, right?
The government has a hard enough time tracking down money laundering in the real world, if they made a tax on virtual items it would simply put a few more hoops in the way of people who want to get real money out of it. IE They would launder it. The people getting money would still wind up with less, but unscrupulous people could make a buck off of it instead of the government. Meh.
Monstar L
Who do I vote out of office? Give me a f-ing ballot. Who do I vote out of office? Gimme a name. Gimme a name! >:(
(-1: Post disagrees with my already-settled worldview) is not a valid mod option.
even if you rez at the graveyard?
Ira
IANAL and IANA Accountant, but I believe if you "make money" off of a hobby, you 1) have to declare the income and 2) can deduct the actual expenses.
Making money by monetizing game assets is no different than making a profit by buying and reselling items on EBay. You generally get to deduct costs that are 100% related to your hobby/business such as subscription fees, and make partial deductions for costs that are partially used for your enterprise, such as your computer, subject to limits set by Congress.
If the IRS determines you "labored" to create your virtual world before selling it for US Dollars, they may also hit you with self-employment, Social Security, and medicare taxes. On the bright side, you can open up a self-employed IRA and enjoy other benefits of being self-employed. In the eyes of the IRS, that big island full of stuff is no different than the quilt your mother made from raw materials then sold for a profit on E-Bay.
Here's where things can get tricky with respect to the IRS:
If you barter assets in-game, they probably won't be taxable. But if you barter for a real-world asset, or an asset in another game, they may be. The IRS taxes barters, particularly barter-for-labor or barter-for-fruits-of-labor, as taxable events, just as if the items had been bought or sold for money. Appraising the value of an island full of stuff in one game that you trade for a similar island in another game can be tricky, much like trading two old, collectable manuscripts or paintings.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
Taxes should apply as normal to real money paid for access to objects in environments.
/dev/null and claim losses on all the data I failed to analyze. After all there are many companies monitoring traffic and providing reports.
You already do this when you purchase Microsoft Products. You don't buy anything but rights to access the code under specific conditions.
The only thing needed to track is real world cash.
Stupid Examples:
1) I take my cable connection and count all the bits I dump to
2) Tracking virtual ecomomies mean someone other than the government is printing money.
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 ). 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).
ustr: Managed string API with ave. 44% overhead over strdup(), for 0-20B
According to Blizzard, I don't own anything inside of the World of Warcraft. Why the hell would I be taxed on property that belongs to someone else?
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"Every artist is a cannibal, every poet is a thief."
Your wife or girlfriend's body is not for sale. However there are some people who would pay money to sleep with her. Only losers use prostitutes, but it takes bigger losers to pay real money for online equipment and characters. The fact that you have no intention of paying for it doesn't matter. It only matters that somebody would.
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.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
Taxation without representation
"I just can't sit while people are saying nonsense in a meeting without saying it's nonsense" J Watson, Sci Am 288:(4)51
Oh, and before anyone laughs their way to the bank, the kicker is that anything above 100 million is taxed at 100%. All of it. Bill Gates dies, he can't leave more than 100 million dollars worth of assets to any one person. Bill can't take it with him, and nobody who complains about inheriting *only* 100 million dollars can possibly be taken seriously. Here's a giant leg up over everybody else - if you want more you have to earn it.
[javac] 100 errors
They can tax my Meat when they pry it from my (Cold Damage), Beaten Up(3), (eXtreme Mittened) hand.
These are my friends, See how they glisten. See this one shine, how he smiles in the light.
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.
"I am the king of the Romans, and am superior to rules of grammar!"
-Sigismund, Holy Roman Emperor (1368-1437)
Second Life is unusual in two ways:
1. The items users create or buy in-game
continue to belong to the players. They can,
and do, sell, lease, and rent them for in-game
currency.
2. There are multiple legal exchanges allowing
you to convert Linden Dollars to US Dollars, and
vice-versa. The exchange rate floats from day to
day, depending on the health of the SL and US
economies.
I am by no means a Bush supporter or wealthy by any standard, but I do oppose the estate tax. The reason for opposing it is because the contents of the estate are assets that have been accrued AFTER taxes have already been taken. What REALLY needs to be done is eliminating all of the loopholes in the income tax system.
As it is now, the estate tax is a kind of comeuppance for those with money and utilize the loopholes year after year. Even though the wealthy that don't utilize the loopholes are very rare, they will ultimately have the assets double-dipped when the death bell tolls.
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,
How the heck would the government spend a few Neopoints from Neopets?
Maybe the game sites need to be sure the point system in the game is properly listed as having a cash value much like coupons did for a while. Remember when states wanted to charge a sales tax on cents off coupons? The coupons started having a cash value of 0.005 cents each in the USA. You would need to have 200 of them to have a cash value of a penny.
It would take a lot of coupons to have a taxable value of interest to the IRS. Expired coupons have no cash value.
The truth shall set you free!
After reading TFA, it's not completely clear. Are they talking about taxing in-game transactions, or taxing in-game content sold for real world $$? Because the former is beyond ridiculous, while the latter actually sounds pretty reasonable. Of course, then there's the fact that most MMOs make it 'illegal' to sell in-game content for real-world $$ in the first place. The only real exception I can think of is Second Life.
There is no -1 Disagree mod. Slashdot.org/faq defines mod options. USE IT.
People tend to learn via reward and punishment, and a 100% tax would most certainly be punitive; why would you punish people for being successfull and reward them for being failures? The other point is that the inheritence is being inherited, with your system it's being inhertited by the government rather than who the dececed choose
Apocalypse Cancelled, Sorry, No Ticket Refunds
There are some transactions that result in no real movement of money. I work for my employer, who pays me via direct deposit. Their bank balance goes down and mine goes up (all on a computer somewher). I go and buy a song off iTunes, paying with my credit card (all electronic). I pay the bill via my bank's web site, again, an electronic transaction.
You could also play WoW, which tracks your gold stash in a computer somewhere. You can farm some gold, changing a number in a database, much like the direct deposit transaction. You can then go and buy an item somewhere, again via an electronic transaction.
Assuming that I was telecommuting to my job, the only difference between that and WoW is that Visual Studio and Eclipse don't have such shiney graphics.
Obviously, there should be some sort of distinction created, because to the educated observer one is a game and the other a job.
"Because Science" is one step from "Because old book". Try "Because of my experiment testing my falsifiable assertion".
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).
ustr: Managed string API with ave. 44% overhead over strdup(), for 0-20B
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
Huh? If you take your money and use it to fire your funeral pyre, nobody will be taxed. If you transfer it to somebody as an inheritance, then that person is taxed -- not you. You're dead, so you can't pay taxes.
Now, with respct to family farms, lets go over this one last time; the fact is very, very few people inheriting farms or even family businesses pay the estate tax.
Figures from the IRS in 2004 show that in that year, across the entire United States, there were only 440 estates where the majority of the value was in a family farm or business. This was 2% of all estates taxed in 2004. There were a total of around seven thousand estates that had some business or farm component, except for the 440 mentioned above, all these estates were made up of a majority of liquid assets. Presumaby in in the 95% of the cases where business/farm estates consist of a majority non-business assets, the inheritor can keep the business by liquidating some of those assets.
But what about those 440 estates? How many small familiy farmers in this were put out of business? Probably none or very few.
Of those 440 estates, the vast majoirty (the 350 valued at $1.5M to $2M) paid a rate of 1.6%. I'm leaving out estates of less than $1.5M because they pay 0%. So if you were a family farmer or small business owner who inherited a $2M estate, you'd have to come up with $32K. Assuming you came to this with no liquid assets of your own, and received no cash equivalents in your inheritance, that's a lot of money. However even in this worst case, it wouldn't be difficult ot raise $32K with $2M of collateral, if you have a half way viable business.
Republicans like to argue as if everybody paid the top rate of 47%. How many farm or business estates paid this rate in 2004?
None.
The highest rate paid on any business or farm estate in 2004 was 22.2%; this was paid by a grant total of 30 estates in the entire country, each of which was valued at over $20M.
It is possible that some of these 30 inheritors had to sell the family business. However as these would net over fifteen million from the sale, they are not exactly starving.
Now, those figures are two years old. What about family farmers today? Well, as of 2005, the exemption is $2M. And if you are a farmer, you get to exclude the value of your land and equipment before you start counting towards your $2M exemption.
By the way, notice how assiduous congress is in raising the exemption for estates from $1.5M to $2M, and how it contrasts with the lack of inflation indexing on the alternative minimum tax, which more and more middle class people pay. Adjusted for inflation the $100,000 benchmark used in 1970 would now be more than 5x as much in current dollars. The people at the lower end of the AMT range don't have anything like the tax shelters that people making over half a million do.
So, this year we can expect only 200 or so farms to come under the estate tax, and that will only apply to cash, not the farm or equipment, and only cash over $2M.
Now you can argue the estate tax is bad policy. You can even argue that the estate tax is morally wrong. However, you can't argue that the estate tax is bad policy or morally wrong because it puts small farmers and businessmen out on the street.
Post may contain irony: discontinue use if experiencing mood swings, nausea or elevated blood pressure.
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.
Sig cannot be found.
If the IRS accepts payment in game plat, gold, credits, isk, etc...
Steve's Computer Service, Hobbs, NM
The estate tax is bad fiscally because it's negative impact on the economy, wasted money spent on estate lawyers/accountants and financial schemes for avoidance, is way out of proportion to the actual tax revenues gathered. In comparison to other taxes, there are virtually no actual revenue benefits, since almost everyone with that kind of money will pay others to legally avoid the tax instead, leaving those affected generally just those who were marginal and didn't expect to be affected.
It's a stupid immoral tax that doesn't really have much in the way of benefits (in terms of revenue), but acts as a large distortion on the economy in the form of putting money in places/legal fictions it wouldn't naturally go otherwise in addition to being wasted in paperwork-type activities that don't contribute to actual wealth building for society.
So yeah, get rid of it permanently. Why would anyone want to keep it? As some sort of symbolic "Ha ha, we screwed a couple or rich heirs whose parents didn't donate enough to lawyers and accountants!" measure?
It would be much better for all that avoidance money to be spent on something that produces wealth for us all, rather than on useless paperwork.
The party of stupid and the party of evil get together and do something both stupid and evil, then call it bipartisan.
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.
Perhaps the one reason most of humanity is in the condition it's in is because most of humanity isn't able to provide a proper legacy for their offspring. Why not admit that those stable institutions would be unlikely to exist if it were not for a societal value system of investing in the future. A society that has puntitive inheritence taxes would seem likely to be one that slips into promiscuious consuption, like those societies with execessive inflation rates. Even Gates has established a charitable foundation, a manuver designed to keep the rable from allocating his legacy rather than him.
Apocalypse Cancelled, Sorry, No Ticket Refunds
Other people have said this, but I'll put it in my own words:
If I ever wind up with a real world tax liability as a result of a transaction that occurred entirely in-game, then my time playing such games is at an end. Period.
I am OK with taxing income when someone sells in-game assets for real world money. This is as it should be. But if I wind up owing the IRS money because I pick up the Sword of a Thousand Truths off of a raid boss in WoW, then my days playing such games is over. I doubt I am the only one that feels this way. Lawmakers take note: you will be harming the economy in a very real way if you tax that.
Intelligent responses welcome, flames will be met with marshmallows.
Money isn't real, it's a social contract. The estate tax is an economic corrector that prevents the growth of an aristocrat class that is forever rich and never has to work. Wealth accumulates without work when interest is better than inflation. It is not fair to get an infinite amount of reward over many generations from a finite amount of productivity over a few generations. Society doesn't have to foot the bill for Paris Hilton's lifestyle just because her ancestors were productive. It is neither beneficial to society nor fair.
If you want a banana republic with an entrenched aristocracy so badly, why don't you go move to one?
Sig cannot be found.
movie scarface...
WTF kind of artform have we created?
Do I get to count losses (due to player theft or otherwise) against my taxes owed as well?
Only to the extent of income, and only as an itemized deduction.
On the other hand, reporter Julian Dibbell wrote an article on whether gamers should pay real-world taxes on virtual treasures and got a different opinion from IRS's Business and Specialty Tax Line.
This stuff is fairly interesting to me. Completely ignoring this "Internet barter" would open up fairly large loopholes in the taxation system. On the other hand, strictly enforcing such rules would be ludicrously burdensome on both the government and the taxpayers. Most likely what we'll see is essentially what we have now. Technically these transactions will be taxable, but such taxes won't be enforced unless someone started really abusing things.
If it were up to me we'd just eliminate income taxes altogether. The whole idea that the government would even consider taxing these innovative economies points out what's so wrong with the income tax. Free trade is a good thing - it should be encouraged, not taxed.
What punishment ?
After you have died, no force on this earth can punish you in any way whatsoever, that's the domain of Higher Powers.
You mean like the United States and the Kennedy's? Seriously my Boss was born in El Salvidor and grew up during a ten year communist revolution, he's seen first hand the effects of punitive inheritence taxes, forced land redistribution schemes, What really happens when farmers are prohibited form automating the production because it might reduce menial farm jobs and a whole raft of commie/liberal appeasment policies and it ain't pretty. Some very close friends of mine won $209 Million in the mega-millions lottery, that means after lump-sum and taxes, they got $89 Million Check; that money isn't sitting in a matteress collecting mold, it's in a wealth-management account, being invested in our economy. The money is being used in a whole spectrum of stocks, bonds and even a direct investment by purchasing a small business. Sure all these redistribution schemes seem to sound nice on an emotive level, at least when your among the nine hunger cannibles voting to eat number ten, but they don't work in practice. You need to take an Economics course and try to stsay awake when they talk about the multiplier effect.
Apocalypse Cancelled, Sorry, No Ticket Refunds
Most people think very short-term, like you, some people think longer term. Your thinking about the effects durring one lifetime, people who amass 8 and 9 digit fortunes tend to think along the terms of 3 and 4 lifetimes and that fortune is often the result of 3 and 4 generations of effort. To people who think like this, an inhertitence tax is like stealing the food out of their children's mouths, they are going to protect that money. Right now there is a whole industry devoted to protecting a person legacy from the taxman, so it could easily be argued that inheritence taxes just redisturbute the wealth from the rich to the upper-middle class lawyers and accountants anyways.
Apocalypse Cancelled, Sorry, No Ticket Refunds
It is fairly easy to argue income tax should always apply. I enjoy my job but that doesn't excuse me from paying tax. Any activity where I end up with more real world cash then when I started it is an income and should be taxed.
In fact as a programmer I could do most of my current work inside secondlife, but wouldn't expect this to save me any tax.
However when it comes to sales taxes it is much harder. When you sell an ebook or video form a website you have to pay sales tax (ignoring all the complex cross-border rules), why should you not have to pay it when you buy an ebook or video inside a 'game' like secondlife.
Any distinction between a scroll of teleportation, a map of the forest kingdom, and a tourist guide to Australia I purchase and read 'inside' secondlife seems arbitrary.
We already pay tax on 'expansion packs' that only confer in-game benefits, why should we not pay tax on in-game purchases that can confer real world benefits.
However simply accepting across the board taxation is only the start of the problem. In lots of games outright theft can be encouraged. How do you construct a tax form for a space pirate? What about cheats, do you have to start locking them up for forgery.
The example of game economies are just an extreme case of how poorly our legal and financial systems can cope with any information economy. In truth sales tax doesn't work as designed for any information assets, in-game or otherwise. Eventually governments will be forced to realise this.
If you want a tax system that makes logical sense (this doesn't appear to have ever been a criteria for any current tax system) it has to be proportional to consumption of physical resources.
Society doesn't have to foot the bill for Paris Hilton's lifestyle just because her ancestors were productive. It is neither beneficial to society nor fair.
Pardon? How does society "foot the bill"? Seems Ms. Hilton is footing the bill for whatever she purchases. If her money is invested in instruments that put that cash back into play for others to borrow and use to kick start their own dreams, and she profits from that, that's usury, not cheating. So her Dad built an empire, and then chose to leave his hard-earned money to her. He is within his rights to do so, and I would argue that we should defend his right to do so.
If you want to talk about being fair, then let's go with a flat tax, no exceptions, no deductions except for families that fall below the poverty line, no loopholes, and remove the tax cap on programs like Social Security. The overall tax rate could be reduced considerably, and the rich would pay in a proportionate, and therefore fair, amount.
It's easy math.
*** *** You're just jealous 'cause the voices talk to me... ***
B)You can still leave your wealth to whoever/whatever you want, you just have to distribute it. If you can't manage to do that, the government can distribute it for you.
I'm not saying that this would be the perfect system, but I think it has a lot of benefits.
[javac] 100 errors
I already given the reason for that, but I will repeat it for you. Mr. Hilton may have been very productive. And he does have the right to provide for his descendants. But when investment interest is greater than inflation this leads to a scenario where all of his descedants lazily accumulate an infinite amount of wealth from Mr. Hilton's finite amount of productivity. There is nothing fair about this. You would argue that Paris Hilton's money funds investment and that is her productivity, but you arguing from your premise. Paris does nothing and is a lazy, worthless drain on the economy. She is a blackhole for productivity.
I totally agree with a flat tax and I could write 10 more paragraphs detailing how fucked up US taxes are and how congress should have minimal control over the tax rates but they should be controlled by someone analagous to the Chairman of the Federal Reserve who would set rates according to factors such as growth, savings,
Surprised you huh? You thought I was a liberal for being for the estate tax. I am for the estate tax because it introduces fairness and naturally corrects the economy and class structure. I also happen to be for the privatization of social security as well as a flat tax. I am a pragmatist, I look at each idea on it's own merits.