Straw poll

[rowyn]

[Poll #1832887]

 

Bonus question: why do you think the two should or should not be taxed at equal levels?

Comments

[level-head.livejournal.com]

Neither, in this scenario, falls into the long-term capital gains category.

It is possible to have a higher "gift tax" sort of thing for the lottery winnings, but these are a small part of society and the small gain is not worth distorting a tax scale to make a dubious point.

This actually applies to the "tax the rich" concept as well: Despite the chilling impact it would have on business, the actual revenue generated would be less than 1% of the deficit -- and will actually make the deficit worse by reducing the economy. Even a slight reduction wipes out the gain.

Most aren't tracking on the fact that the Bush capital gains tax rate reduction was actually a substantial increase in tax dollars collected.

===|==============/ Level Head

[terrycloth.livejournal.com]

If it was a private lottery, they should pay the same amount. It doesn't really make sense to have the government give someone money and then tax them on it though.

On the other hand, I guess it works as a sleazy advertising ploy to be able to put big numbers up for the lottery winnings while hiding the fees.

[rowyn]

I was thinking about that. Most lottteries in the US are state-run and generate substantial profit margins for the state gov'ts involved. But most income tax is paid at the federal level: does it make sense for the federal gov't to tax you on money the state gov't gave you?

[tuftears.livejournal.com]

I'd expect state lottery winnings to be exempt from state taxes but not from federal taxes... And withholdings to be applied at the time of issuance, accordingly.

[terrycloth.livejournal.com]

Well, you specified multi-state here.

And I don't know -- yeah they're different parts of the government but they're all still government. Separate state and local and federal taxes has always been a big headache for me. So... stupid...

[tuftears.livejournal.com]

Hmm, right now they would both be paying 35% (the highest tax bracket). But imagine if tax brackets were scaled this way:

The amount you earned over $10 million in 1950 is what would get taxed 90%. So if you earned $11 million, $900,000 of the last million would go to the man. Subsequently, the first $20,000 would be taxed 20%, then the next lump 30%, so on and so forth.

You didn't specify whether the 50 million was a lump sum or the yearly payment received from the lottery. If it were a lump sum, I would have to argue that Robin is an idiot and should have taken the annuity, because she will be severely taxed and lose most of the money awarded. However if it is the annuity then we go back to 'income is income'.

I don't award Pat any particular moral bonus for being a business owner on 'should be taxed more or less', that's not the point of income tax. If we want to encourage business owners in some way, we should give deductions for economy-stimulating actions they take or offer financial support for new business initiatives. Income tax is simply a 'pay your share for the greater community we all live in'.

[rowyn]

I am assuming, for the sake of this example, that neither Robin nor Pat has a way of sheltering part of this year's income in order to get more favorable tax treatment in later years.

[tuftears.livejournal.com]

Yeah, it's all 'after all applicable deductions'!

I'm going to guess your next entry will discuss the why of this entry. };)

[genkitty.livejournal.com]

Income is income, I don't believe in a windfall tax or gift tax. How /much/ should be taxed is a different argument. I don't have the verbiage at hand to clearly spell out my thoughts on how both can reduce their tax-load with charitable contributions and economy stimulation activities, but I have these thoughts :)

[octantis.livejournal.com]

I think they should be taxed equally. Money is power, and those two people have attained the same amount of power. In taking on that power in a shared world of limited resources, I believe they take on a duty to use that power responsibly. I'll leave off the subject of paying taxes as a form of expressing that power for some other conversation.

[alltoseek.livejournal.com]

I hate lotteries and think they shouldn't pay. The tickets are a voluntary tax anyway, may as well tax the winnings too. Esp. the Feds, since the lotteries are all by state. But state (and local too, for that matter) should tax the hell out of them too. Why not? People won't stop playing, and even if they do, good! Lotteries are stupid and immoral, in my opinion.

[terrana.livejournal.com]

I don't feel qualified to answer this question.

[jordangreywolf.livejournal.com]

That's pretty much my take on it as well. Exactly how much a particular person should be taxed (a percentage point more? a percentage point less?) is too mushy for me to have strong opinions on.

[telnar.livejournal.com]

I think that incentives matter at least as much as equity here. There are at least two relevant principles to that question:

-- Recognizing that the political process isn't going to do a good job implementing fine tuned incentives.
-- Considering what incentives we would prefer if we had the standard philosopher king option to implement them perfectly.

I think that we would be at least as well off discouraging people from gambling on the lottery, but would like to encourage investments in businesses, so from the philosopher king vantage point, I want the lottery tax to be at least as high. From the political economy perspective, though, I'll settle for exactly as high because I don't care for a precedent encouraging micromanaging behavior through the tax code.