my inner geek, <email@example.com>, writes:
> How are federal governments equiped to tax alternative incentive
> systems, such as virtual reality with direct brain stimulation?
> Instead of exchanging money for goods and services, we may be
> exchanging digitized sensations. Furthermore, the exchange may be
> completely wireless. In this case, how would a government extract
> wealth from the process of one brain exchanging digitized experience
> with another brain?
This would be a barter transaction, as when the mechanic fixes your muffler in exchange for you helping him set up his PC. You are both required to declare the benefit you receive as income, estimating the fair market value of the service. Of course this kind of income goes widely unreported.
I think though that it is unlikely that "digitized sensations" would take the place of money. Money works best if it is more or less interchangeable. One dollar bill is the same as another. Digitized sensations, to be useful, would probably need to be all different.
Also, you have the issue of "counterfeiting". Can people create their own digitized sensations? Or is this a specialized industry, like the games business today? We don't use video games as money, and they wouldn't work very well in that role.
> In this type of economy, how does an artist or teacher pay federal
> property taxes or income taxes, when the exchanges are exclusively
> experiential and private in the most sensually intimate sense? When
> this type of technology arrives for the general puplic, the
> government will have to switch from the role of zookeeper/prison
> guard to the role of agent facilitating the dismantling of the old
Assuming you don't want to have an intimate sensual experience with the plumber just to get your toilet fixed, there will probably still be a role for money.
> How do you visualize this process actually occuring without there
> being a stage of general amnesty from government prosecution?
Overall I don't see the process occuring in quite the way you seem to be suggesting. There are technologies which will make it harder for third parties to track the flow of money, and these may pose challenges for governments. Exchanges of digitized data like music and videos may progress to become exchanges of mental experiences, but it is hard to predict the economic impact.