First and foremost, allow me to apologize for the lengthy delay since my last post. Pursuing the 'Hollywood style of work', as I do, means that my work is sometimes very busy and sometimes the opposite. The months of November and December were very, very busy.
The reason for tonight's late post is a series of twitters that occurred today surrounding a relatively innocuous Ars Technica posting. The posting concerns a 'Taxpayer Advocate' that recommended to the IRS that virtual worlds should be taxed. Other than the sheer complexity of taxing virtual economies, which has been extensively discussed elsewhere by such august minds as Professor Richard Bartle and Professor Edward Castronova, among others, the idea of taxation at a micro-transactional level caused me to fire off two quick twitters:
(Nina Olson being the taxpayer advocate in question)
quickly followed by:
This set off a storm of direct messages and public replies asking me about taxation, mostly defending it. Most specifically, how are we to pay for police and schools.
To begin, as most of you know, I am a libertarian and am not the least bit frightened by the thought of a complete lack of federal, state, and local government intervention and services. I have yet to see an instance of a government program that worked as advertised and was delivered at or under budget. Most recently, the TARP program came under fire as there were no reporting guidelines on how the public funds were used. When this proposal, that the bailout-ees would have to account for how the largess was used to the baleout-ors, their reponse was:
"Iowa Banking Superintendent Tom Gronstal said he believes it will take some time before specific tracking mechanisms are put into place."
Ok, it was a 25 question application to apply for TARP funds, which went speedy quick. But when the people who give you the funds want to know how the funds are being spent, 'it will take some time'. If you had a stockbroker who refused to tell you how your deposits were performing, would you wait or find a better option. Would you have even put your money with him/her in the first place?
So, my response regarding taxes, like all government programs, is that they are perpetuating an unsustainable model. There will never be enough programs to make the government happy, and the government never shrinks itself. It's self-perpetuating, because the people in charge of deciding what to shrink are the people who stand to gain by expanding instead of shrinking the programs in question. Compound this extensive human self-gratification and you have a tax rate of >50% for many of us.
I live in a house that I own outright. I still pay a five-figure property tax bill, of which the monthly payments would afford me a lovely Italian or German sports car. In addition, I pay ~50% in income taxes, and am taxed a 6% consumption tax (sales tax) on any of the remaining proceeds I try to utilize.
On top of this, I write hundreds of dollars in monthly checks for both of my childrens public schools, for supplies and the like. Even given the $33 billion allowance afforded to the k12 system through the 2007 federal budget (and not including any additional funds from state or local sources), the teachers are still overworked, horribly underpaid, and begging parents like me for more money for supplies. If you were really generous with this allowance, and gave everyone in the U.S. 19 or under an equal share, they would each walk away with nearly $400 a piece, not counting any state/local sweetners.
My advice for those that are concerned that lack of taxes would render us school-less? Try it. Privatize all of it. Watch how capital efficient and quality-competitive education would become. It works every day in industry (barring misguided government regulation of energy and finance sectors), so why not education? Look at the quality of private higher education, like Stanford, and tell me that education is a unique snowflake that cannot be privatized without severe damage.
Public services such as Police and Fire are trickier. The Romans, who at one point only paid taxes three days a year, individually contracted private security and fire services. This was rife with problems as one would expect, with Julius Caesar's own cash-heavy-friend Crassus having made his fortune by instituting the first Roman fire department. That Crassus used it to extort the flaming homeowners to sell to him at remarkable discounts is unconscionable, however does not invalidate the private security model (e.g. ADT, Westec, Secom, San Francisco "Police Specials") and other more recent success stories.
Do you think that you know more or less than some administrator how and where your children should be educated? Do you think that a private company with a service-level-agreement for pay/profit would be faster or slower than your local police/fire/ambulance? I worked for an ambulance company at one point, and discovered that municipalities 'bid out' these franchises to private companies who run them at a profit. If you can do that for ambulances, why not fire and police services as well? Why not let the homeowners themselves decide what security/fire/ambulance companies they want a contract with, rather than some overpaid local administrator?
Net-net, taxes are a bad idea in the virtual world just as they are in the real world.