My hero this week is Congressman Jim Saxton from New Jersey, chairman of Congress' Joint Economic Committee. While Senator Saxton seems to be pretty moderate, he is a voice of reason on a recent issue: the IRS taxing so-called 'virtual economies'- those economies which operate inside some Massively Mulitplater Online Ropleplaying Games (MMORGs). Saxton released a statement:

“There is a concern that the IRS might step forward with regulations that start taxing transactions that occur within virtual economies. This, I believe, would be a mistake,” Chairman Jim Saxton said today. In response to this concern, the staff of the Joint Economic Committee has begun an examination of the public policy issues related to virtual economies. A virtual economy is defined as the universe of transactions that occur within an online community, such as Second Life or World of Warcraft. These transactions include the sale of goods and services and take place entirely within virtual economies; there is no real-world or physical exchange. However, a real-world value can often be assigned to such transactions using exchange rates or other methods.

Based on existing law, if an individual generates cash income in U.S. dollars from transactions in virtual economies, the question may arise whether a tax is due on that real-world income. However, if the transaction takes place entirely within a virtual economy, then it seems there is no taxable event. Such distinctions should be addressed and resolved in a common-sense manner. Clearly, virtual economies represent an area where technology has outpaced the law. The goal of the forthcoming JEC study is to help lawmakers understand the issues involved and head off any premature attempt to impose a tax on virtual economies.

This makes sense to me, and absurd that the IRS would try to get its hands on videogame players' hard earned rupees (or whatever their called). Now if only we could extend that logic to the evil capital gains tax!
(hat tip: TaxProf)

My hack this week is a blast from the past, former Soviet President Mikhail Gorbachev. Mr. Gorbachev compared America's plan for a border fence to his own Berlin Wall.

"You remember President Reagan standing in Berlin and saying, 'This wall should be torn down,'" said the 1990 Nobel Peace Prize winner. "Now the United States seems to be building almost the Wall of China between itself and this other nation with which it has been associated for many decades and has had cooperation and interaction with.

This is lunacy! The border fence is to keep unwanted people out, while the Berlin Wall was built primarily to keep unfree people in and under Soviet control! In fact, the border fence is the complete opposite.

UPDATE: 10/22 Fized Saxton's title. Thanks, Anon commenter!

Posted by Ryan S. on Friday, October 20, 2006 at 11:17 AM | Permalink |