Straw poll

[rowyn]

Robin and Pat both have incomes of $50,000,000 in 2011 (net of all applicable deductions). Robin's income came from winning a multi-state lottery. Pat's income came from the business she runs.

Poll Tax question!

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

Comments

[level_head]

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]

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]

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]

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]

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

[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]

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

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

[genkitty]

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]

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.