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No person should have to pay $300 million in tax for any reason whatsoever.

by yubiox 9y ago

recursive 9y ago
How did you come to that conclusion?
soneil 9y ago
They basically have to. I get the notion than it doesn't seem fair, that no person is using a $300m share of the state's resources. But math just doesn't back it up. The US federal budget is somewhere around 4 trillion dollars. A quick google suggests income tax is 47% of federal revenue. The US has a population of about 323 million. Plugging these all together gives me a federal revenue of about $6k per person, per year. The alternative to it being "fair" to ask a lottery winner for $300m tax, is for it to be "fair" to tax every man, woman and child that $6k per year. That almost sounds doable, but that's $6k per retiree, $6k per one-year-old. $6k per unemployed or student. There's a lot of people you simply can't get that money from - so it has to come from somewhere else. It isn't fair, it's reality. (For the lottery in particular, there's a simple solution. Lottery winnings aren't taxed here, the ticket is. Not only does this mean no $300m tax bill on a $500m win, but it also means all those silly little wins are taxed fairly too.)
- etiam 9y ago
  I don't understand what it would mean to tax the ticket. Could you elaborate on that?
  - bildung 9y ago
    I think GP meant instead of paying zero taxes on the $1 ticket right now, collect $0,1 of the ticket as tax that goes into the federal budget. Now the (smaller) winnings could be tax free while the federal income would stay about the same.
  - soneil 9y ago
    We have a sales tax of 23%(!), so for each $1 ticket, 23 cents goes in the coffers and 77 cents goes into the lotto. So a $500m prize would mean 650m $1 tickets were sold, and the state has already collected $150m. It sounds like the state loses out this way, but it also means all the smaller prizes were already taxed at the point of sale too. By taxing it as earnings, you're never going to collect tax on all those little $10 prizes. But by collecting at the point of sale, $2.98 was already collected that little $10 prize. I guess it's "six 'n two threes" .. the state gets their money either way. (Caveats; I'm not arguing this is actually better, just that there are alternatives to the winner's huge tax liability. %'s may be slightly fudged, ours isn't actually taxed as sales tax, but collected as a revenue from the state-owned lottery. And I totally realise this works much easier where the entire nation is a single tax jurisdiction, rather than your state/federal split.)

No person should have to pay $300 million in tax for any reason whatsoever.

by yubiox 9y ago

No person should have to pay $300 million in tax for any reason whatsoever.

recursive 9y ago

How did you come to that conclusion?

soneil 9y ago

They basically have to. I get the notion than it doesn't seem fair, that no person is using a $300m share of the state's resources. But math just doesn't back it up. The US federal budget is somewhere around 4 trillion dollars. A quick google suggests income tax is 47% of federal revenue. The US has a population of about 323 million. Plugging these all together gives me a federal revenue of about $6k per person, per year. The alternative to it being "fair" to ask a lottery winner for $300m tax, is for it to be "fair" to tax every man, woman and child that $6k per year. That almost sounds doable, but that's $6k per retiree, $6k per one-year-old. $6k per unemployed or student. There's a lot of people you simply can't get that money from - so it has to come from somewhere else. It isn't fair, it's reality. (For the lottery in particular, there's a simple solution. Lottery winnings aren't taxed here, the ticket is. Not only does this mean no $300m tax bill on a $500m win, but it also means all those silly little wins are taxed fairly too.)

etiam 9y ago
I don't understand what it would mean to tax the ticket. Could you elaborate on that?
- bildung 9y ago
  I think GP meant instead of paying zero taxes on the $1 ticket right now, collect $0,1 of the ticket as tax that goes into the federal budget. Now the (smaller) winnings could be tax free while the federal income would stay about the same.
- soneil 9y ago
  We have a sales tax of 23%(!), so for each $1 ticket, 23 cents goes in the coffers and 77 cents goes into the lotto. So a $500m prize would mean 650m $1 tickets were sold, and the state has already collected $150m. It sounds like the state loses out this way, but it also means all the smaller prizes were already taxed at the point of sale too. By taxing it as earnings, you're never going to collect tax on all those little $10 prizes. But by collecting at the point of sale, $2.98 was already collected that little $10 prize. I guess it's "six 'n two threes" .. the state gets their money either way. (Caveats; I'm not arguing this is actually better, just that there are alternatives to the winner's huge tax liability. %'s may be slightly fudged, ours isn't actually taxed as sales tax, but collected as a revenue from the state-owned lottery. And I totally realise this works much easier where the entire nation is a single tax jurisdiction, rather than your state/federal split.)