U.S. Congress Studies Public Policy Around Virtual Economies

As Second Life reaches 1 million residents today, the Joint Economic Committee of the United States Congress announced they are studying public tax policies related to virtual worlds.

It is no wonder.  Spending in Lindens, the Second Life currency, reached over 92 million dollars for September of this year, and October is already on track to outstrip that figure by 20%.  Linden Lab today announced that largely due to heavy media coverage, it expects to add 50,000 new resident accounts today alone.  In recent months Second Life has been growing by 38% per month in a sector that generates between $1 billion and $3 billion USD a year.

According to Representative Jim Saxton, chairman of the JEC, the committee is concerned that the Internal Revenue Service, the U.S. taxing body, may step in and begin imposing taxes on virtual transactions before appropriate public policies have been set.  “This I believe would be a mistake,” says chairman Saxton.

The present explosive growth of virtual worlds has civic leaders sitting up and taking note far earlier than they did when the World Wide Web began to change and challenge the flow of information and commerce. These virtual environments are rapidly creeping into our real world business and public social and economic structures.   It seems that the U.S. Congress wants to lead the public policy debate about how these economies will be regulated.  But the impact of these virtual spaces on public places has been more quietly advancing for quite a while.

See the full Joint Economic Committee press release here (pdf).

Photo credit:  Linden Lab Market Data

October 18, 2006