Big Brother gets virtual

The line between the real world and the online world has gotten blurry over the last few years to where it is changing the way we understand the reality of our culture.

I know, I know, that sounds dramatic and science fictionish, but the signs are there. For example, the offline world and the online world are no longer independent.

Take away the Internet and the offline world has real problems. Companies would stop communicating, business would slow down, financial transactions would take forever, and Wendy King "a dying woman who has decided to donate what I have to charity" would not be able to solicit my assistance in transferring $10.3 million of her husband's investments "for the good work of the lord."

No, the intersection of online and offline is becoming so pervasive that it is the new human social reality. It is the same kind of transformation that the telephone and television engendered. The 'Net is having a greater impact in a fraction of the time and its transformative force is unavoidable.

Now, we know from countless tales that politicians do not understand technology, so riddle me this: Why is it that politicians seem to have glommed onto this intersection to the point of wanting to extend real-world taxation into the virtual world?

That's right, the big Massively Multiplayer Online Role-Playing Games (MMORPG) are being looked at as possible revenue sources.

We're not talking about taxing the proceeds of selling virtual merchandise and virtual real estate, because that is real money. Nope, we're talking about taxing virtual earnings and savings. Honest! The thinking apparently is that because the virtual currencies can be converted into real money they are, in effect, real assets.

And there really is money tied up in these games. Indiana University economist Edward Castronova sized up the economics of a world named Norrath in the MMORPG EverQuest and calculated the gross national product of Norrath is about $135 million. "Per capita, it comes to $2,266. . . . By all measures, Norrath is richer than many important countries"

According to a Reuters/Second Life News Center story, Dan Miller, senior economist for the Congressional Joint Economic Committee, recently said "Right now we're at the preliminary stages of looking at the issue [of taxing MMORPGs] and what kind of public policy questions virtual economies raise - taxes, barter exchanges, property and wealth. . . . 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."

Wow. How about if you extend that logic. Say you developed some software at home but have yet to sell it, does that mean its virtual value becomes liable to real taxation? The worst thing is, for any of these scenarios you know that the IRS won't accept virtual money! And that would be crazy because they would be saying that virtual money is both as good as real money and not as good as real money. You can't have it both ways, chaps.

Luckily some politicians recognize the inherent insanity of this idea. Rep. Jim Saxton (R-N.J.), who is chairman of the Joint Economic Committee, confirmed that the committee was studying the issues of public policy and taxation as related to virtual economies but declared, "This, I believe, would be a mistake." Right on Jim.

Perhaps the most disturbing thing is that this is yet another incursion of the government into our private lives and, while the blurring of reality and virtuality in our lives is unavoidable, when the government starts believing the virtual is as good as the real we're heading down some dangerous paths.

Get real with or on Gibbsblog.

Learn more about this topic

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