Boy, I wish I could tell you. If I could, I probably wouldn't because I'd be on a plane to Vegas to get the biggest marker I could and go on a sprts wagering binge. .

Seriously, though, I think it will never happen in the near future. Two many powerful interests involved. besides, if Congress is going to not tax internet sales because it's unpopular (no other good reason), there's no way they'd do this.
Plus, the valuation methodology would be nuts. Finally, taxation would kill these reward programs. Think about the value of the benefits we as frequent travellers get.

Take this as a hypothetical.

Traveler A, a platinum SPG member, had earned two free weekends worldwide by staying 10 nights at the lovely Four Points Omaha South for $59 a night. Traveller A decides he or she will take a loved one to the beautiful St. Regis Dana Point, scheduled to open in August. These nights are free, and because of his or her elite status, A and his or her friend/loved one are put in a gorgeous suite, valued at a rack rate of $2500 a night.
Additionally, A bought 2 round trip tickets on Continental to Orange County for $300 each. But, because he or she is a gold member, they are upgraded to FC, the cost of such a ticket being $2500 each.

Thus, arguably, for a cost basis of about $1200, A and his or her guest get about $10,000 in retail value goods for a cost of $1200. If A was in the 39% bracket, this would theoretically be taxable income of about $8800, leaving A with a tax burden of about $4000 just for this trip alone.

As you can see, such accounting would make such a "free" trip no longer free. You would see elite travellers turning down upgrades because they would not be affordable. This would decimate these marketing programs, and all of the associated industries which have built up over the years. Because of the difficulty in accounting for frequent travel benefits and because real taxation of miles and other benefits as income would destroy the industry, I seriously doubt such a plan will be seriously considered.

Of course, I'm not psychic, or I'd be on the plane to Vegas.
P.S.
I'm also not an economist, and by no means a tax expert nor a travel expert (if there is such a thing). Nor obviously a spelling expert. But this is my 5 minute take on the question at 11:30 at night with a slight temperature. No legal advice given.

[This message has been edited by BoSoxFan45 (edited 05-01-2001).]