Thursday, February 23, 2012
This paper examines the practical relationship between income and consumption in the context of electronic gaming, which I define as wagers made using some electronic accounting device, either in the form of a casino player card or an on-line player account. My thesis is that only those amounts that taxpayers ultimately transfer from their player cards or online accounts into some form of governmental currency or credit should count as “gross income.” Amounts merely credited to taxpayers’ cards or accounts should not qualify. Cutting against my thesis is a long-standing tax doctrine called “constructive receipt.” That doctrine applies when a taxpayer has the ability to accept income but declines. I argue that applying the constructive receipt doctrine to electronic gaming converts what should be a tax on income into a tax on consumption. This paper continues an exploration of the relationship between the economic and legal concepts of income which I began in The Play's the Thing: A Theory of Taxing Virtual Worlds, 59 Hastings L.J. 1 (2008). Examining the problem of taxing electronic gaming illustrates how the legal and economic concepts of income are and must be different, and illuminates the boundaries between the concepts.