# Congratulate me -- I Just Won the Lottery (A Tax Policy Debate) **URL:** \ **Category:** Great Debates\ **Created:** [January 26, 2012, 6:34pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758 "2012-01-26T18:34:50Z")\ **Posts on this page:** 12\ **Page:** 10
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [January 30, 2012, 8:19pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/181 "2012-01-30T20:19:10Z")
> [@Una\_Persson](#): > > Please research this before you answer. I just pulled up my state municipal fund market website and found something like $15M in state and federal tax-free funds available **today.** Second, the way you get the 100% tax-free funds is…you buy the 100% tax-free funds. Third, many funds are AMT-free; in fact all of mine are such. You ensure this by the simple process of buying funds that are not subject to AMT. Finally, you do know the default rate for municipal bonds is incredibly low, right? Like hundredths of a percent for actual tax-raising authorities? > > So I can buy treasuries at 1.8% that aren’t fully tax-free for the AA+ rated US government, or else my tax-free munis from AAA rated states that have never in their entire history defaulted, at 3-5%. Which are 100% tax-free. This is no contest. I guess I would say that you are looking at a very recent and (most likely) a temporary phenomenon. If you look at historic spreads between treasuries and munis, treasuries yielded more than munis. On the issue of AMT, I realize that you can buy non AMT bonds but try buying 80 million dollars of it, especially if you are only looking in your own state/city and you are looking for laddered maturities. You can probably do it but its not at all easy and Ross Perot (at least in 1992) could not get his hands on enough of teh stuff so he ended up owning a lot of treasuries. ---
**Author:** ![Aji\_de\_Gallina](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/aji_de_gallina/32/260_2.png) [@Aji\_de\_Gallina](https://boards.straightdope.com/u/Aji_de_Gallina)\ **Post date:** [January 30, 2012, 11:55pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/182 "2012-01-30T23:55:45Z")
> [@emacknight](#): > > Should unicorns fly out of your ass? If unicorns fly out one’s ass, are they taxable? Are they new wealth? Capital gains or income? ---
**Author:** ![Euphonious\_Polemic](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/euphonious_polemic/32/3002_2.png) [@Euphonious\_Polemic](https://boards.straightdope.com/u/Euphonious_Polemic)\ **Post date:** [January 31, 2012, 12:04am UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/183 "2012-01-31T00:04:33Z")
> [@emacknight](#): > > ETA Googling “the US needs a wealth tax” gets plenty of responses. Seriously? You’re going for a Google-vomit as proof that we here at the SD think that the US needs a wealth tax? Or even as proof of anything? You realize that this thread will now be included in a search of “the US needs a wealth tax”. Also included in your lovely google-vomit search would be a website that says “the US needs a wealth tax like I need red-hot needles poked into both my eyes” This is debate strategy at the **Starving Artist** level. It is beneath you. ---
**Author:** ![Starving\_Artist](https://avatars.discourse-cdn.com/v4/letter/s/aeb1de/32.png) [@Starving\_Artist](https://boards.straightdope.com/u/Starving_Artist)\ **Post date:** [January 31, 2012, 1:07am UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/184 "2012-01-31T01:07:55Z")
Really? One post (justified, btw) out of 12,000 constitutes a “debate strategy”? That’s **Euphoneous Polemic** level argumentation right there. 😛 ---
**Author:** ![Euphonious\_Polemic](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/euphonious_polemic/32/3002_2.png) [@Euphonious\_Polemic](https://boards.straightdope.com/u/Euphonious_Polemic)\ **Post date:** [January 31, 2012, 4:19am UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/185 "2012-01-31T04:19:52Z")
It’s merely one example of many other “strategies”, all of which are at approximately the same level. You’re not limited to just one. Thanks for dropping by though. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [February 1, 2012, 10:22pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/186 "2012-02-01T22:22:33Z")
> [@Ravenman](#): > > Look, this is Great Debates, not the SATs. I’m not interested in rhetorical Battleship, in which contestants randomly fire off questions trying to guess what your views are on this issue. Sure, which is why if you look, I was asking **RNATB** to clarify the statement, “Investing in municipal bonds helps everyone (well, at least people in that locality) just like paying taxes. I don’t really see how it’s a bad thing when you do that.” **Fear Itself** choose to then intentionally misinterpret what I wrote with what you describe as rhetorical Battleship. I’m not sure why you chose to go after me instead of either **RNATB** who made the original statement, or **Fear Itself** for derailing the thread. And within my response was a factual statement, bonds are for when they don’t have the cash (ie I have a mortgage because I didn’t have $200k). And that it means they’ll have to pay interest back to the bond holders (ie I’ll have paid twice as much on my house after interest). > [@Ravenman](#): > > On the Internet, it is sometimes hard to differentiate someone taking an extreme position (the government should never take on debt!) from a nuanced one (the government is making a bad investment with this particular bond) if people don’t put in a little effort to explaining themselves > \For a guy so caught up in the measuring the precise meaning of two statements, I think you misread **RNATB** ’s statement quite a bit. Which is precisely why I asked **RNATB** to clarify his statement about municipal bonds (being good for everyone, and like a tax). You’ll notice I didn’t do what **Fear Itself** did and intentionally misrepresent what was written. I could have said something just as dumb like, “So, municipalities should always pay for everything with bonds?” > [@Ravenman](#): > > I read the statement that you originally quoted as meaning that people who buy bonds are investing in communities, in just the same way as how paying taxes also invests in communities. Now back on point: It’s possible to view them as “investing in communities.” But another way of investing in communities is to invest in companies that act locally, who use IPOs to get funds to finance projects. If the OP were to invest in GM, allowing GM to open (or restart) a plant in that town, presumably that would be good for the local economy. Lots of jobs, lots of tax revenue. Oddly enough, the money **Bricker** makes from that would be taxed. And right now people earning capital gains are taking a lot of flack for it. So we have a statement, “people who buy bonds are investing in communities, in just the same way as how paying taxes also invests in communities.” Which to me suggests that investing in local companies is also investing in communities, making it like paying taxes. For some reason, one investment gives people a warm fuzzy feeling. The other seems to invite scorn. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [February 1, 2012, 10:32pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/187 "2012-02-01T22:32:02Z")
> [@Euphonious\_Polemic](#): > > Seriously? > > You’re going for a Google-vomit as proof that we here at the SD think that the US needs a wealth tax? The statement made was, “there aren’t many people calling for a wealth tax.” I don’t know why that was said, and was curious myself. Turns out, using a simple google search, that there are in fact a lot of people calling for a wealth tax. It’s not an unheard of concept. And if you look, you’ll notice I didn’t say anything about “people on the SD.” That part was added by you. > [@Zeriel](#): > > It appears to be \*\*emacknight \*\*that’s getting accused of railing, not you. > [@DMC](#): > > From what I can tell, zero people in this thread are advocating for a > wealth tax, but don’t let that get in the way of him railing against all zero of us! And I didn’t once say that anyone in this thread was calling specifically for a wealth tax. Here was the original statement: > [@Hamlet](#): > > But, again, not many people are calling for, nor is there much chance, of the US enacting a wealth tax rather than the income tax. Well, turns out lots of people are and have been calling for a wealth tax. Which is a separate issue from whether or not it’s workable or likely to be enacted. Nice job beating to death that straw man. ---
**Author:** ![kaylasdad99](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kaylasdad99/32/3398_2.png) [@kaylasdad99](https://boards.straightdope.com/u/kaylasdad99)\ **Post date:** [February 1, 2012, 10:37pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/188 "2012-02-01T22:37:05Z")
> [@Una\_Persson](#): > > If I had $80 million after taxes, I’d put them into tax-free municipal bonds at 4%, earn $3.2 million a year tax-free, and enjoy life. I’d still have to fill out a 1040 long form, but I’d have no taxes owed, not even Obama’s new 1.9% investment tax for his health care reform. > > Then again, some of the “bearded sages” of this message board have argued that tax-free municipal bonds are “immoral”, so I guess I’d go to hell anyhow. :rolleyes: Just so you know, my long term financial plan relies on putting my after-tax (and other distributions) lottery winnings in the instruments you describe. I’ll be counting on being able to turn to you for advice on finding such an investment. In exchange for a moderate consideration, of course.\* Another of my expectations is that I will contribute to both my State’s and the Federal General Fund at the rates I would be seeing were I to earn the amounts returned at an hourly wage. \*So if you ever see a PM from me, it’s likely to be VERY good news for you. 😃 ---
**Author:** ![Euphonious\_Polemic](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/euphonious_polemic/32/3002_2.png) [@Euphonious\_Polemic](https://boards.straightdope.com/u/Euphonious_Polemic)\ **Post date:** [February 2, 2012, 12:34am UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/189 "2012-02-02T00:34:09Z")
> [@emacknight](#): > > The statement made was, “there aren’t many people calling for a wealth tax.” I don’t know why that was said, and was curious myself. Turns out, using a simple google search, that there are in fact a lot of people calling for a wealth tax. It’s not an unheard of concept. And if you look, you’ll notice I didn’t say anything about “people on the SD.” That part was added by you. If a website contains the phrase “If people say the US needs a wealth tax then they are idiots.” Your google-vomit treats this as a hit. 'AHA" you say, “look, google says that people are calling for a wealth tax.” Do you seriously not see the flaw in this technique? ---
**Author:** ![erislover](https://avatars.discourse-cdn.com/v4/letter/e/71e660/32.png) [@erislover](https://boards.straightdope.com/u/erislover)\ **Post date:** [February 2, 2012, 5:19pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/190 "2012-02-02T17:19:18Z")
> [@emacknight](#): > > Now back on point: It’s possible to view them as “investing in communities.” But another way of investing in communities is to invest in companies that act locally, who use IPOs to get funds to finance projects. If the OP were to invest in GM, allowing GM to open (or restart) a plant in that town, presumably that would be good for the local economy. Lots of jobs, lots of tax revenue. Oddly enough, the money **Bricker** makes from that would be taxed. And right now people earning capital gains are taking a lot of flack for it. > > So we have a statement, “people who buy bonds are investing in communities, in just the same way as how paying taxes also invests in communities.” > > Which to me suggests that investing in local companies is also investing in communities, making it like paying taxes. For some reason, one investment gives people a warm fuzzy feeling. The other seems to invite scorn. First of all, I don’t think people look down on investment. Who is saying people shouldn’t profit from investment? Income should be taxed as income. That’s the very short version of people’s complaints. Secondly, describing investment as taxation merely because both can be looked at as community investment seems like one of the more remarkable uses of equivocation in this thread. “Being like something” is not a transitive relation. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [February 2, 2012, 6:18pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/191 "2012-02-02T18:18:37Z")
> [@emacknight](#): > > Seriously, the conditions for taking on debt should not be unfamiliar to people. There is good debt and bad debt. For a town/county/state to issue municipal bonds may or may not be a good thing. They certainly aren’t always good, or always bad. We’re not talking about _issuing_ bonds. As you say, local bond issues may be a good thing or a bad thing. What we’re talking about is whether it’s “immoral” for **Una** to invest in those bonds once they’ve been issued. It’s not as though she’s holding the city council at gunpoint to make them issue more tax-free bonds. As **Voyager** notes, the return on municipal bonds is relatively low, despite the tax benefits. Therefore, by buying municipal bonds, **Una** is financing schools, hospitals, prisons, low income housing and all sorts of other things that the municipality might not otherwise be able to afford. Not only that, but she’s depressing the interest rate the city has to pay, since if she doesn’t buy them the city will have to jack up its bond returns to encourage others to buy. ---
**Author:** ![just\_some\_guy5](https://avatars.discourse-cdn.com/v4/letter/j/5daacb/32.png) [@just\_some\_guy5](https://boards.straightdope.com/u/just_some_guy5)\ **Post date:** [February 2, 2012, 6:54pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/192 "2012-02-02T18:54:16Z")
> [@Really\_Not\_All\_That\_Bright](#): > > We’re not talking about _issuing_ > As **Voyager** notes, the return on municipal bonds is relatively low, despite the tax benefits. Therefore, by buying municipal bonds, **Una** is financing schools, hospitals, prisons, low income housing and all sorts of other things that the municipality might not otherwise be able to afford. The return on municipal bonds isn’t low **despite** the tax benefits, it’s low **because** of them (e.g., I’d be indifferent between a 3% return on tax-free municipal bonds vs. a 4% return on taxable bonds assuming my marginal tax rate is ~25% and the risk / reward profiles are similar). Separately, someone further up the thread noted that municipal bond yields were a much better deal than treasuries given their higher interest rate and tax-free status. To clarify, muni bonds are substantially riskier than treasuries (although still relatively safe compared to corporate bonds or the stock market). A number of municipalities have declared bankruptcy in the past, and many more will likely do so in the future. [Previous page](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758.md?page=9)