# 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:** 20\ **Page:** 9
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [January 28, 2012, 9:44pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/161 "2012-01-28T21:44:20Z")
> [@emacknight](#): > > Then again, you will probably misunderstand that as well and assume I’m talking about unicorns. I always assume you are talking about unicorns. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [January 28, 2012, 9:45pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/162 "2012-01-28T21:45:34Z")
> [@Fear\_Itself](#): > > I always assume you are talking about unicorns. And I always thought you had trouble understanding English. Glad we cleared that up. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [January 28, 2012, 9:47pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/163 "2012-01-28T21:47:08Z")
So, municipalities shouldn’t buy anything they can’t pay for in cash? ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [January 28, 2012, 9:48pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/164 "2012-01-28T21:48:45Z")
> [@emacknight](#): > > Good to know, certainly explains a lot the confusion you seem to have with the English language. You may be shocked to learn that those two sentences are not the same. > > Then again, you will probably misunderstand that as well and assume I’m talking about unicorns. Why don’t we change the subject of debate from syntax, linguistics, and what the meaning of is is, and perhaps you could illuminate for the rest of us your views of the conditions under which it is bad for municipalities to finance large capital projects? For example, if a small town wants needs to raise $50 million to build a new school, but state law prevents the town from beginning construction until the town has sufficient resources to pay the full construction cost. I would say that the town should consider a bond issue, thereby financing the construction cost. I think you may disagree with that, but I don’t know what your suggestion is for what the town should do. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [January 28, 2012, 9:50pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/165 "2012-01-28T21:50:27Z")
> [@Fear\_Itself](#): > > So, municipalities shouldn’t buy anything they can’t pay for in cash? Should unicorns fly out of your ass? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [January 28, 2012, 9:51pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/166 "2012-01-28T21:51:47Z")
> [@emacknight](#): > > Should unicorns fly out of your ass? At least now you are talking about a subject you are more likely to know something about. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [January 28, 2012, 9:52pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/167 "2012-01-28T21:52:52Z")
> [@Ravenman](#): > > Why don’t we change the subject of debate from syntax, linguistics, and what the meaning of is is.. Do you also think those two statements are synonymous? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [January 28, 2012, 9:53pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/168 "2012-01-28T21:53:49Z")
Heh. Do you always answer a question with a question? ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [January 28, 2012, 9:54pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/169 "2012-01-28T21:54:02Z")
> [@Fear\_Itself](#): > > At least now you are talking about a subject you are more likely to know something about. And what was it that I was talking about that time? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [January 28, 2012, 9:56pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/170 "2012-01-28T21:56:28Z")
> [@emacknight](#): > > And what was it that I was talking about that time? You don’t remember? ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [January 28, 2012, 10:07pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/171 "2012-01-28T22:07:44Z")
> [@Ravenman](#): > > …perhaps you could illuminate for the rest of us your views of the conditions under which it is bad for municipalities to finance large capital projects? 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. Here was the original statement I responded to: > [@Really Not All That Bright](#): > > 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. So two things wrong there, 1) it is in no way like paying taxes, since you actually make money off the process (ie interest). 1. A municipal bond is a town taking on debt. So it follows the same benefits and problems as anyone or anything else taking on debt. A bond issue to finance a much needed bridge may allow the region to prosper and easily pay back the loan. A county that issues bonds to build a shiny new stadium only to have the team leave is shit out of luck. Note that the loan has to be paid back using future tax revenue. If in the future the region can’t afford to pay back the loans, they have to increase taxes. Doing that tends to drive people out, further reducing revenue. Then their credit rating is cut, and they can’t afford to issue new bonds (the interest rate goes up). Result, the municipality goes bankrupt. I can’t believe I had to write that. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [January 28, 2012, 10:09pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/172 "2012-01-28T22:09:01Z")
> [@Fear\_Itself](#): > > You don’t remember? Curious how you would misinterpret it. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [January 28, 2012, 10:52pm UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/173 "2012-01-28T22:52:57Z")
> [@emacknight](#): > > Do you also think those two statements are synonymous? 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. For those two statements, I could see that one person may think that bonds are dangerous and municipalities should pay for everything with cash. I could see another person may, like you later explained, be warning that debt can sometimes, but not always, be a useful tool. 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. > [@emacknight](#): > > Here was the original statement I responded to: > > So two things wrong there, 1) it is in no way like paying taxes, since you actually make money off the process (ie interest). 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. Obviously buying bonds is different than paying taxes in many, many ways, such as that investors make profits, buying bonds is voluntary, taxes are a terrible place to stash extra money, and so on. 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. And also, back to your statement that if **Bricker** were paying more in taxes bonds wouldn’t be needed, that’s not really the case either. Many states and localities have sufficient revenue to afford capital projects, but require financing so that the money is available all at the right time. It only takes a year to build a school, but it may not make sense to raise taxes by an amount equivalent to the cost of the school for only that one year. If a county knows that its revenues are such that the school can be built if it is financed over a period of years. And your example of irresponsible debt notwithstanding, I remind you that the default rate for municipal bonds is approximately 100 times lower than the default rate for corporate bonds. But the concern for public sector financing is touching. > [@](#): > > I can’t believe I had to write that. Personally, I find it hard to make observations or compelling arguments if I restrict myself to interrogative prose. ---
**Author:** ![Bricker](https://avatars.discourse-cdn.com/v4/letter/b/977dab/32.png) [@Bricker](https://boards.straightdope.com/u/Bricker)\ **Post date:** [January 29, 2012, 1:00am UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/174 "2012-01-29T01:00:42Z")
> [@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! What railing? Where have I railed? ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 29, 2012, 1:58am UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/175 "2012-01-29T01:58:12Z")
> [@emacknight](#): > > So two things wrong there, 1) it is in no way like paying taxes, since you actually make money off the process (ie interest). While you do make money off muni bonds, their interest rates are significantly below other investments you can make. You get some of this back from them being tax free, and some is due to their safety. Mrs. Heinz Kerry, being able to afford all sorts of interesting investments and financial advisers, could have made a lot more than she did, so she was giving up money to support the government. My father refused to invest in anything else. We bemoaned his low return - but his investment wasn’t hurt at all by the recession. ---
**Author:** ![Zeriel](https://avatars.discourse-cdn.com/v4/letter/z/58956e/32.png) [@Zeriel](https://boards.straightdope.com/u/Zeriel)\ **Post date:** [January 29, 2012, 2:18am UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/176 "2012-01-29T02:18:36Z")
> [@Bricker](#): > > What railing? Where have I railed? It appears to be \*\*emacknight \*\*that’s getting accused of railing, not you. ---
**Author:** ![Bricker](https://avatars.discourse-cdn.com/v4/letter/b/977dab/32.png) [@Bricker](https://boards.straightdope.com/u/Bricker)\ **Post date:** [January 29, 2012, 2:54am UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/177 "2012-01-29T02:54:15Z")
> [@Zeriel](#): > > It appears to be \*\*emacknight \*\*that’s getting accused of railing, not you. Oh. Sorry. Rail away at the railing, then. My bad. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [January 29, 2012, 3:01am UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/178 "2012-01-29T03:01:10Z")
So, what was the point of the OP? ---
**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 29, 2012, 4:20am UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/179 "2012-01-29T04:20:20Z")
> [@md2000](#): > > The trouble with wealth tax is it eats away at your assets. Is that good policy? Well it can be during deflationary periods if you have people hoarding money and not investing it. You create an artificial inflation rate in the form of a wealth tax which creates a hurdle rate for capital to generate in order to maintain its vallue. BUt that doesn’t happen in a modern economy very often. > [@Kobal2](#): > > - individuals come into the world without any wealth > - any wealth one accrues in their lifetime can be said to derive strictly from the laws and environment provided by society. All the business savvy in the world won’t help a body keep money from a bunch of guys with guns > - therefore, people who accumulate a lot of wealth in their lifetime have benefitted more than others from society. Whether it’s because they learned how best to game society, or because the existing society is uniquely suited to reward their natural talents and inclinations, or because society let their parents accumulate and keep a lot of wealth to hand down to them is relatively irrelevant > - since they benefit more from society, it’s only right that they contribute more, to the tune of just how fortunate they were. > > FWIW, I’m not sure I actually believe in this (and I’m quite certain I don’t give much of a shit about taxes or economics), but I don’t really see a flaw in this line of argument. It might be a bad idea to do it or lead to terrible consequences like the Job Creators committing collective seppuku, but it’s justifiable from a philosophical P.O.V. We are all born naked and society is your partner in all your endeavors and society should get its share. > [@xtisme](#): > > if you live in Virginia I’d advise leasing your high priced cars and boats and such :p). I’m not sure you can get around the car tax by leasing it. > [@](#): > > I’d invest in a gun, at a minimum, if you are going to stack $80 million in your closet though…and a really, REALLY big house, since that’s got to take up a lot of room. Where will you put your shoes? A million dollars (in hundreds) is about then size of a case of beer. I can fit 80 cases of beer in my walk in closet. > [@emacknight](#): > > Is this really an edge issue though? Right now there is rabid obsession with how a very small group in the US is taxed, specifically those that make money off of long term capital gains. My completely uninformed guess is that there could be more lottery-winning-millionaires than guys like Romney paying 15% on his long term capital gains. Yeah but guys like Romney make much more than those lottery millionaires. > [@](#): > > So the gutcha here is that certain people are eager to find rationalizations to go after Romney and Buffett’s money, but can’t quite figure out how to get **Bricker’s**. I’m not sure people WANT to go after Bricker. He’s been taxed already. > [@Una\_Persson](#): > > 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: Its not immoral, it can be tough to pull off because not all munis are actually 100% tax free, they are frequently subject to AMT and munis are much higher credit risks than treasuries, why would you need to take that kind of risk. Just get the risk free stuff and pay the tax, you will have plenty of money and you will sleep better at night. > [@emacknight](#): > > I read recently Ross Pero also has most of his vast wealth in municipal bonds. Then that is recently (and probably the result of the fire sale on munis that we had during the financial crisis). The objective isn’t to reduce your tax burden, the objective is to maximize your after tax risk adjusted return. For a LOT of people that means buying US treasuries with most of their money. > [@obbn](#): > > Not that I agree with the death tax, for that money has already been taxed when it was earned. Really? So if Bill Gates dies with all That Microsoft stock, when was it taxed the first time? > [@](#): > > It seems as if it a redistribution program and it not only affects the “wealthy”. The death tax certainly affects the middle class as well. My parents aren’t rich, but they purchased a nice home many years ago that is probably worth in the neighborhood of $400k. They have savings of a few hundred thousand and other assets worth a few hundred. When they pass, the government will take a share of what is left before my sister and I see anything. You do realize that the first $5 MILLION dollars of their estate is not subject to the estate tax, right? You knew that, right? > [@](#): > > But to level a tax on someone just because they have assets is insane. It reeks of jealousy. Like I said before I can see it if we are in a deflationary cycle and people are hoarding money but that’s not to raise income or punish wealth, its to encourage people to invest their money so we can get out of a deflationary cycle. > [@Really\_Not\_All\_That\_Bright](#): > > 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. Interesting fact, when Bush cut taxes for the rich, a lot of the rich took their tax savings and bought treasury bonds, effectively lending money to the government instead of paying it as taxes. SO the money ended up in the same place (in some ways) we just pay interest on it now. ---
**Author:** ![Una\_Persson](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/una_persson/32/346_2.png) [@Una\_Persson](https://boards.straightdope.com/u/Una_Persson)\ **Post date:** [January 29, 2012, 4:46am UTC](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758/180 "2012-01-29T04:46:45Z")
> [@Damuri\_Ajashi](#): > > Its not immoral, it can be tough to pull off because not all munis are actually 100% tax free, they are frequently subject to AMT and munis are much higher credit risks than treasuries, why would you need to take that kind of risk. Just get the risk free stuff and pay the tax, you will have plenty of money and you will sleep better at night. 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. [Previous page](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758.md?page=8) [Next page](https://boards.straightdope.com/t/congratulate-me-i-just-won-the-lottery-a-tax-policy-debate/610758.md?page=10)