Why isn't it fair for the government to tax income?
Creating an exception for income received from the government would lead to all sorts of crazy fraud, and would necessitate long and complex codes for determining what is an exempt government agency and what isn't.
For example: is a community college a government agency for purposes of "tax exempt" income? What about a utility district? What about private-public partnerships?
It may be that having special cases and extra complexity has a higher overhead than just getting everyone to use the same path, even if that looks like "more" work from a distance.
I dread to think how this may work if an individual has multiple income streams, some possibly for the public sector (so would be tax exempt), and how that may affect the total used to calculate tax brackets and similar. And the politics of defining that - no doubt whatever rules you use for this they'll be some situations that people consider unfair.
It also makes it easier to compare income against the private sector, as each dollar income means exactly the same if both then go through the same tax system.
The US tax system is already designed to put as much burden on the individual as possible (for whatever reason - possibly mostly lobbying from the industry that has grown up around this complexity) - more complexity feels pretty bad to me.
Gambling in general is a loser's game, but the games people TYPICALLY play in gambling isn't generational wealth.
What makes the lottery slightly different is "YOLO": yeah on average it is not a good play, but someone presumably wins, and for their one shot in life it gets transformed with generational wealth.
That is: go big or go home.
... well, except that most lottery winners lose it all, but that's a different issue.
To emphasize, I'm not advocating playing the lottery, just that odds don't really account for the biological reality of only getting one life to live.
Some quick back of the envelope calculations suggests that powerball becomes positive estimated value at about 650mil for jackpot or above (though if we want to discount for taxes, lump sum etc, high than that) but obviously that EV is massively weighted towards one very very very rare event
I've got no qualms with folks who can afford it playing the big jackpots from time to time, especially because the money coming in is typically earmarked for positive social programs.
>because the money coming in is typically earmarked for positive social programs
Ostensibly it's "earmarked" ... but by supposed earmarking, legislatures think they can otherwise defund said "positive social programs" from the general budget
Right - the $1.28B is a figment. Really the number is like $750M for lump sum. Getting $433M after a $750M windfall seems reasonable with what I know about tax rates.
Since I learned of them in my childhood, it always seemed obvious that lotteries are a government-approved scam, but I never imagined they were a scam on so many levels.
Rare for a scam to lay out the odds pretty readily for you. Governments run lotteries exactly because you can trust them. Bob pulling numbers out of a hat for his local lottery will probably be tempted to cheat.
And then they front-load all of the impossibly, stupidly, comedically overoptimistic numbers in the marketing (eg. pre-tax winnings), and have a fine print from which you can barely determine the odds of success (and if you're capable of that you most likely aren't participating either way), and then the whole game is designed so that you feel like you have some sort of superstitious influence over whether you win...
Please, let's not pretend this isn't about extracting money from people who are poor at decision-making.
I understand the odds and play the lottery. I don't think I'm a bad decision maker. I'm sure you waste far more than $2/week on what others might view as a waste.
I want to be pedantic about this, because words matter.
No one is forcing anyone to buy a lottery ticket.
No one's being threatened with jail time if they don't buy a lottery ticket.
No one's being dragged into a legal process where they are presumed guilty until proven innocent if they don't buy a lottery ticket.
There are not tens of thousands of enforcers out there looking for people who didn't buy their lottery ticket.
There are no hotlines to anonymously report those who didn't buy a lottery ticket.
Politicians do not regularly buy voter approval by messing around at the margins with lottery ticket payouts.
There is no organized industry - hundreds of thousands of people - lobbying Congress to keep the purchase of lottery tickets as complicated as possible so they can keep their jobs.
You may not like the lottery. You may never play the lottery. But don't mistake it for a tax. That makes it too easy to forget the sheer tonnage of force, coercion and political strongarming a real tax involves.
People regularly call gambling and especially the lottery a tax on the stupid because the odds are so bad it’s like paying a tax for being stupid enough to play. It’s just a saying people have, you don’t have to be pedantic, it’s not literal.
The OPs point is that it’s gross the government participates in taking money from people through the lottery, many of whom likely have a gambling addiction.
I would bet the payout and the odds would be better...
What is organized crime but another alternate government(small g government), no no wait, hear me out. You pay them and they make sure your business operates without trouble, exactly the same set of services the government offers, organized crime is illegal because the government(big G government) hates the competition.
Joking aside, organized crime sucks for the same reason that all dictatorships suck.
The other point to note, where private owned gambling exist(nevada etc) it regulates(self and government oversight) to make about the same profit margin as the insurance industry. The margin on the lottery is unethical.
The IRS collects taxes enacted by Congress. We all benefit (very broadly speaking) from taxes collected via government programs and public spending; the winner has $400M they didn’t have before. No one lost except those who didn’t win the lotto.
I can walk around outside and see the officers patrolling the streets because my tax dollars paid for them to be there, and the thousands of cars driving on those streets daily because my tax dollars paid for the maintenance on those roads.
I can look up in the sky and see blue, and I can see the mountains dozens (or in some cases, hundreds) of miles away, because local air quality agencies have been cracking down on polluters. I can swim in the ocean because multiple agencies have been regulating polluters, and cleaning the water, so that it is safe for human activity.
I can visit 3 national parks and dozens of state parks within a 4 hour drive, all paid for by my tax dollars.
And, oddly enough, in all my years as a tax professional, I've only seen one person go to jail for not paying taxes: Wesley Snipes. Everyone else just pays the penalties and fines and moves on with their lives.
I have to say I can't really imagine what difference it would make to me if I got $433M instead of $1.28B or vice versa. I just find it unimaginable either way.
> can't really imagine what difference it would make
With $1.28B, you'd be able to commission a superyacht and crew and operate it for years. With $433M, you'd really need another $200M just to launch, let alone crew and operate.
433.7M dollars is still pretty good. Depending on age, it might also be the smart way to do it. A guy in his 20s winning the lottery and a guy in his mid 60s is two very different use cases for money.
In Canada, the Canada Revenue Agency considers gambling winnings to be windfalls that are not subject tax, so any winners receive the full value of the advertised prizes [0].
[0]
A possible reason as to why this is also the case is that most/all of the lotteries are run by the provinces themselves, so you could think of them removing the taxable amount continuously in an accumulative fashion as the total pot grows and then only advertising what the winner would take home.
National lotteries worldwide are really nothing but a punitive scam to tax the poor by selling them on an illusionary idea of a shortcut to their materialistic dreams. Also I bought $60 worth of Megamillions tickets for the draw.
I think it's quite telling (and depressing) that the vast majority of the comments on this are "taxes are bad" and "wow, they took away that much money?" instead of "he now has enough money to live three lifetimes in luxury and still have millions left over, he's set for life and more".
Our societies are obsessed with having as much as possible, instead of with having as much as needed, which are two very different concepts. Economists have a concept of a utility curve; most people, it seems, ignore that concept.
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[ 4.7 ms ] story [ 115 ms ] threadThat the government can tax their own money they give away is disgusting
I also have a problem with government employees (who, by definition, are paid with tax dollars) being taxed on their pay
It's beyond ridiculous!
Creating an exception for income received from the government would lead to all sorts of crazy fraud, and would necessitate long and complex codes for determining what is an exempt government agency and what isn't.
For example: is a community college a government agency for purposes of "tax exempt" income? What about a utility district? What about private-public partnerships?
Why is it fair for any entity to demand your personal property at gunpoint?
Let me introduce you to the US tax code ...
Until the passage of the 16th amendment, it wasn't.
It may be that having special cases and extra complexity has a higher overhead than just getting everyone to use the same path, even if that looks like "more" work from a distance.
I dread to think how this may work if an individual has multiple income streams, some possibly for the public sector (so would be tax exempt), and how that may affect the total used to calculate tax brackets and similar. And the politics of defining that - no doubt whatever rules you use for this they'll be some situations that people consider unfair.
It also makes it easier to compare income against the private sector, as each dollar income means exactly the same if both then go through the same tax system.
The US tax system is already designed to put as much burden on the individual as possible (for whatever reason - possibly mostly lobbying from the industry that has grown up around this complexity) - more complexity feels pretty bad to me.
What makes the lottery slightly different is "YOLO": yeah on average it is not a good play, but someone presumably wins, and for their one shot in life it gets transformed with generational wealth.
That is: go big or go home.
... well, except that most lottery winners lose it all, but that's a different issue.
To emphasize, I'm not advocating playing the lottery, just that odds don't really account for the biological reality of only getting one life to live.
Ostensibly it's "earmarked" ... but by supposed earmarking, legislatures think they can otherwise defund said "positive social programs" from the general budget
You start negative because you have to pay for the ticket
Please, let's not pretend this isn't about extracting money from people who are poor at decision-making.
And in fact it is illegal for anyone other than the government to run a lottery.
in a sarcastic tone I like the lottery, it is a tax on the stupid.
No one is forcing anyone to buy a lottery ticket.
No one's being threatened with jail time if they don't buy a lottery ticket.
No one's being dragged into a legal process where they are presumed guilty until proven innocent if they don't buy a lottery ticket.
There are not tens of thousands of enforcers out there looking for people who didn't buy their lottery ticket.
There are no hotlines to anonymously report those who didn't buy a lottery ticket.
Politicians do not regularly buy voter approval by messing around at the margins with lottery ticket payouts.
There is no organized industry - hundreds of thousands of people - lobbying Congress to keep the purchase of lottery tickets as complicated as possible so they can keep their jobs.
You may not like the lottery. You may never play the lottery. But don't mistake it for a tax. That makes it too easy to forget the sheer tonnage of force, coercion and political strongarming a real tax involves.
The OPs point is that it’s gross the government participates in taking money from people through the lottery, many of whom likely have a gambling addiction.
What is organized crime but another alternate government(small g government), no no wait, hear me out. You pay them and they make sure your business operates without trouble, exactly the same set of services the government offers, organized crime is illegal because the government(big G government) hates the competition.
Joking aside, organized crime sucks for the same reason that all dictatorships suck.
The other point to note, where private owned gambling exist(nevada etc) it regulates(self and government oversight) to make about the same profit margin as the insurance industry. The margin on the lottery is unethical.
How is that not a robbery?
That's literally not an option.
* the vast majority of your seized money is transferred to the 1%
* if it it weren’t, you can’t opt out anyway
I can walk around outside and see the officers patrolling the streets because my tax dollars paid for them to be there, and the thousands of cars driving on those streets daily because my tax dollars paid for the maintenance on those roads.
I can look up in the sky and see blue, and I can see the mountains dozens (or in some cases, hundreds) of miles away, because local air quality agencies have been cracking down on polluters. I can swim in the ocean because multiple agencies have been regulating polluters, and cleaning the water, so that it is safe for human activity.
I can visit 3 national parks and dozens of state parks within a 4 hour drive, all paid for by my tax dollars.
And, oddly enough, in all my years as a tax professional, I've only seen one person go to jail for not paying taxes: Wesley Snipes. Everyone else just pays the penalties and fines and moves on with their lives.
Really puts things in perspective…
With $1.28B, you'd be able to commission a superyacht and crew and operate it for years. With $433M, you'd really need another $200M just to launch, let alone crew and operate.
In Canada, the Canada Revenue Agency considers gambling winnings to be windfalls that are not subject tax, so any winners receive the full value of the advertised prizes [0]. [0]
https://www.canada.ca/en/revenue-agency/services/tax/technic...
A possible reason as to why this is also the case is that most/all of the lotteries are run by the provinces themselves, so you could think of them removing the taxable amount continuously in an accumulative fashion as the total pot grows and then only advertising what the winner would take home.
Our societies are obsessed with having as much as possible, instead of with having as much as needed, which are two very different concepts. Economists have a concept of a utility curve; most people, it seems, ignore that concept.