# Let's Tax Lottery Winnings at 90% **URL:** \ **Category:** Great Debates\ **Created:** [July 15, 2011, 9:09pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175 "2011-07-15T21:09:10Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![Bosstone](https://avatars.discourse-cdn.com/v4/letter/b/22d042/32.png) [@Bosstone](https://boards.straightdope.com/u/Bosstone)\ **Post date:** [July 15, 2011, 10:10pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/41 "2011-07-15T22:10:39Z")
> [@emacknight](#): > > Are you saying that taxing an addition unearned million at 90% would be confiscatory? How low should the tax rate be on an addition million dollars be so that it’s not? Wherever the magic sweet spot is that produces the greatest amount of social benefit with the least amount of individual burden. And no, I don’t know where that is, so don’t ask. I do know it’s somewhere between 90% and what we have now. ---
**Author:** ![SenorBeef](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/senorbeef/32/2220_2.png) [@SenorBeef](https://boards.straightdope.com/u/SenorBeef)\ **Post date:** [July 15, 2011, 10:14pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/42 "2011-07-15T22:14:12Z")
> [@xtisme](#): > > See, you DID get it. 😉 The thing is, that people aren’t suddenly going to say ‘The tax rate is too high…I’m not going to bother to work!’ when it reaches some arbitrary number like 90%. > > … > > The same can be said about taxes. It’s a sliding scale, and moving it at all is going to have some effect on the system as a whole…moving it a little will have a little effect, moving it a lot will have a greater effect. > > -XT Well, we could just have a thread about the laffer curve if that’s what he wants. And people will kick his ass because it’s pretty clear that at 18-21% effective tax rate (factoring in different types of income, deductions, exemptions, etc etc) we’re not on the wrong end of it. Instead he gives us this silly analogy which is either intended as a “haha, you didn’t see my trick until now, gotcha liberals!!!” gimmick which no one fell for, or he’s… well, no, that’s what he’s doing. I guess the analogy has the chance of tricking all of the silly liberals while at the same time letting him dodge the obvious “er, but if we were on the wrong side of the laffer curve, why didn’t revenues go up with the bush tax cuts” question by being able to say “oh but we’re talking about the lottery!” Either way, boring thread. Try harder next time. ---
**Author:** ![SenorBeef](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/senorbeef/32/2220_2.png) [@SenorBeef](https://boards.straightdope.com/u/SenorBeef)\ **Post date:** [July 15, 2011, 10:19pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/43 "2011-07-15T22:19:40Z")
> [@emacknight](#): > > If the tax on an addition $1million was raised to 90%, would people be less likely to take risk? Yes. > [@](#): > > And if they are less likely to take risk, is there a potential downside? Yes > [@](#): > > Lastly, can we offset that potential downside by transferring wealth to a group that wasn’t able to take risk in the first place? Actually… maybe. I tend to think that supply follows demand. If there are people with the ability to pay for things, then a market will pop up to serve it. It seems like a far more logical way of viewing the macro economy than incentivizing the creation of this huge market and hope there’s someone around to be a consumer in it. Anyway, you’re trying to claim you’re scoring points by making an obvious point that no one really contests. Who here thinks that a 90% tax rate wouldn’t discourage work/investment/whatever? At some very high level, high tax rates outweigh their usefulness due to the damage to the economy. I get that. The thing is - we’re nowhere near that level. We’re not even in the same ballpark as it. We’d have to triple our tax load before we even started really seeing the effects of this sort of principle. So if people propose we do relatively minor stuff like adjust the marginal tax rates by a few percent, it’s silly to whip out the "90% tax is on the wrong side of the laffer curve! So you can never increase taxes even if we’re talking about going from 33 to 36% (or, effectively, 18-21% to 19-23% +/-). So you’ve got a failed gotcha ya, a poor analogy, and behind it all, a desire to state the obvious that no one really disagrees with. Well done. ---
**Author:** ![Susanann](https://avatars.discourse-cdn.com/v4/letter/s/7ab992/32.png) [@Susanann](https://boards.straightdope.com/u/Susanann)\ **Post date:** [July 15, 2011, 10:26pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/44 "2011-07-15T22:26:37Z")
> [@emacknight](#): > > Let’s Tax Lottery Winnings at 90%. > Seems like the perfect win/win: conservatives will like it because it’s increasing taxes on the poor since they’re the ones playing the lottery[sup]1[/sup] [sup]2[/sup] [sup]3[/sup] ; meanwhile liberals will like it because it increases taxes on the _newly_ rich which can be given to the poor. This is a good idea, that I think everyone would support. I would have no problem at all supporting a lottery tax. I think it would only be the fair thing to do. Why is this not already passed into law? ---
**Author:** ![Susanann](https://avatars.discourse-cdn.com/v4/letter/s/7ab992/32.png) [@Susanann](https://boards.straightdope.com/u/Susanann)\ **Post date:** [July 15, 2011, 10:27pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/45 "2011-07-15T22:27:58Z")
> [@runner pat](#): > > A large portion of those winnings are small, how would you track and collect on a $20 scratch off ticket? He gets paid $2 in winnings. $20 x 90% = $2.00 ---
**Author:** ![Snarky\_Kong](https://avatars.discourse-cdn.com/v4/letter/s/a183cd/32.png) [@Snarky\_Kong](https://boards.straightdope.com/u/Snarky_Kong)\ **Post date:** [July 15, 2011, 10:34pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/46 "2011-07-15T22:34:04Z")
> [@Susanann](#): > > He gets paid $2 in winnings. > > $20 x 90% = $2.00 I bet he’d buy that ticket if he got paid in gold. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [July 15, 2011, 10:43pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/47 "2011-07-15T22:43:47Z")
Quoth **Bosstone** : > [@](#): > > Also, as a tangential point, I personally am against advertising pre-tax numbers. I’ve often thought about what I would do if I ran a business; if it was a store, I would include tax in the listed prices. If a book was listed on the shelf as $7.50, it would ring up at the register as $7.50, not $7.86. If I hired employees and told them they’d be making $10 an hour, their actual salary would be calculated taking all withheld taxes into account, so they’d really be earning $13.16 but take home $10. You can do that with sales taxes, but it doesn’t work for income tax, because you don’t know what other income sources your employees have, and hence what bracket they’re in (or how far above the boundary of their current bracket they are). This is a large part of why we have to do our taxes, and why withholding is only an estimate. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [July 15, 2011, 10:46pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/48 "2011-07-15T22:46:10Z")
[QUOTE=SenorBeef] Either way, boring thread. Try harder next time. [/QUOTE] Well, it wasn’t really my OP, you see. My own OPs rarely get this much activity, so it must not be all THAT boring. -XT ---
**Author:** ![Bosstone](https://avatars.discourse-cdn.com/v4/letter/b/22d042/32.png) [@Bosstone](https://boards.straightdope.com/u/Bosstone)\ **Post date:** [July 15, 2011, 10:49pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/49 "2011-07-15T22:49:44Z")
> [@Chronos](#): > > Quoth **Bosstone** :You can do that with sales taxes, but it doesn’t work for income tax, because you don’t know what other income sources your employees have, and hence what bracket they’re in (or how far above the boundary of their current bracket they are). This is a large part of why we have to do our taxes, and why withholding is only an estimate. Eh, fair nuff. I admit I’m speaking as a layman without particular experience. I only laid that out as an illustration of my general stance as it pertains to this thread. ---
**Author:** ![SenorBeef](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/senorbeef/32/2220_2.png) [@SenorBeef](https://boards.straightdope.com/u/SenorBeef)\ **Post date:** [July 15, 2011, 10:53pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/50 "2011-07-15T22:53:59Z")
> [@xtisme](#): > > Well, it wasn’t really my OP, you see. My own OPs rarely get this much activity, so it must not be all THAT boring. > > -XT Oh yeah, to be clear, I wasn’t blaming you. And… boring threads get lots of activity all the time. Ones where the OP gets a routine smackdown still cause a feeding frenzy where 30 or 40 different people want to give their own take on the smackdown. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [July 15, 2011, 10:57pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/51 "2011-07-15T22:57:27Z")
No worries…just wanted to be clear that I wasn’t the OP. 🙂 -XT ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 15, 2011, 10:58pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/52 "2011-07-15T22:58:00Z")
I’m confused. The lottery IS a tax. People pay in $100 million, the government pays back out $50 million. If you want to raise taxes on the lottery, you can achieve that by simply lowering the amount the government pays out. If you want a 90% tax on the lottery, simply take 10% of each ticket price and put it in the prize pool instead of putting 50-65% of each ticket price into the prize pool then taxing the winnings. Of course, all these complicated taxes are really the result of various politicians outside the jurisdiction wanting to wet their beaks, or a symptom of government bureaucracy run amok. What I find really offensive, however, is that at this very moment thousands of online poker players have had all their money in the accounts of poker companies like PokerStars and Full Tilt Poker confiscated, and the government’s not giving it back. And a number of people in those various companies are being charged with felonies for providing a service people want, and doing so with a fair vig and scrupulous operating practices. This is done to ‘protect’ the people, ostensibly. In the meantime, you can’t walk into a convenience store without finding government lottery tickets and advertising in your face, government-sponsored video lottery terminal are put in bars where they intentionally appeal to drunks and desperate people, and the government keeps far more vig from this racket than any of the private gambling firms ever dreamed of. ---
**Author:** ![Bosstone](https://avatars.discourse-cdn.com/v4/letter/b/22d042/32.png) [@Bosstone](https://boards.straightdope.com/u/Bosstone)\ **Post date:** [July 15, 2011, 11:01pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/53 "2011-07-15T23:01:28Z")
No argument there. Gambling laws suck hard. ---
**Author:** ![kanicbird](https://avatars.discourse-cdn.com/v4/letter/k/5f8ce5/32.png) [@kanicbird](https://boards.straightdope.com/u/kanicbird)\ **Post date:** [July 15, 2011, 11:07pm UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/54 "2011-07-15T23:07:03Z")
Why not making every ticket a winner and tax at 100%. This way everyone could feel good because they win, and the Gov’t would have plenty of money. Tonight winning number is 1, same as yesterday’s, and remember every lotto ticket you now buy has the number 1 preselected for your convenience and the other numbers have been eliminated. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [July 16, 2011, 2:45am UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/55 "2011-07-16T02:45:42Z")
> [@Sam\_Stone](#): > > In the meantime, you can’t walk into a convenience store without finding government lottery tickets and advertising in your face, government-sponsored video lottery terminal are put in bars where they intentionally appeal to drunks and desperate people, and the government keeps far more vig from this racket than any of the private gambling firms ever dreamed of. Not in Minnesota 😉 ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [July 16, 2011, 3:20am UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/56 "2011-07-16T03:20:49Z")
[QUOTE=SenorBeef] So you’ve got a failed gotcha ya, a poor analogy, and behind it all, a desire to state the obvious that no one really disagrees with. Well done. [/QUOTE] No one? [Taxes: a scale of moral](http://boards.straightdope.com/sdmb/showthread.php?t=615272) > [@Taxes: a scale of moral views](https://boards.straightdope.com/t/taxes-a-scale-of-moral-views/588078/12): > > “I made $10 million. If I make another $1 million I’ll only keep $700 thousand. I will not would rather not have that $700 thousand so I’ll stop earning money.” > > I just have trouble believing that a businessman would have that perspective. If they did, don’t those free-market people realize that if there is $1 million to be made ($700k after taxes), that someone else will step into that void? > > If I had to pay 75% taxes for a system (infrastructure) that lets me make a million, I’d be better off than making nothing. > > I think the “work hard to pay for people who don’t” is a bit of a red herring. There are people who want to live off of society but unless someone can show me good statistics I don’t think it is significant. > > One website puts it at about 1% on welfare, about 12% get food stamps, 4% get unemployment. [Whence comes wealth?](http://boards.straightdope.com/sdmb/showthread.php?t=615853) [Why are the rich so opposed to paying taxes?](http://boards.straightdope.com/sdmb/showthread.php?t=616423) Lots of threads right now involving increasing the top marginal tax rate, and each time a conservative mentions that it will hurt investments. Each time a liberal insists that it won’t, that if a person wants more money they’ll open another store, regardless of the tax rate on their next million. Even if they don’t, someone else will. Someone else tries to explain risk, and the thread deteriorates into another bitch-fest about libertarians. So instead of talking about progressive taxes, the rich, and investments, we look at it from a different angle. Will people risk their money to play the lottery if we change the potential payout? Not the odds of winning, but the benefits derived. As you said, the odds of picking the right power ball number doesn’t change, but instead of $1million you only end up with $100,000. To that we had several people, yourself included, asking why would people play? It seemed intuitively obvious to everyone here that people wouldn’t risk $5 if the tax rate went up on their winnings, even if they’d still win $100,000 instead of $1million. Within so many of the tax threads it is eventually pointed out that the top marginal tax rate was 91% back in the 50s and everything was great. How is it that it’s so obvious that people wouldn’t buy a $5 lottery ticket if their payout changes, but yet people are completely oblivious to how million dollar investments might not happen if the potential payout shrinks. > [@SenorBeef](#): > > If your goal here is to say “see lol taxes discourage working/lottery playing!!! gotcha!”, do you really think playing the lottery and working for pay carry the same motivations and incentives? That they’re so similar that we can model them the same way? They are similar enough that people instantly realized a $5 bet with 1 in one million odds isn’t as desirable when the government takes a big chunk of your winnings. So what would happen to a $500 stock purchase, or $500,000 real estate venture, with way better odds, if the government takes a bigger chunk out of the gains? > [@SenorBeef](#): > > Well, we could just have a thread about the laffer curve if that’s what he wants. We’ve tried, it turns into the same threads as those linked above. How are people supposed to understand the laffer curve if they don’t realize that people won’t risk money if the payout changes? ---
**Author:** ![Bosstone](https://avatars.discourse-cdn.com/v4/letter/b/22d042/32.png) [@Bosstone](https://boards.straightdope.com/u/Bosstone)\ **Post date:** [July 16, 2011, 3:48am UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/57 "2011-07-16T03:48:14Z")
The point of the Laffer curve is that if you’re on the low end, raising taxes can actually _help_. If it didn’t, it wouldn’t be a curve, just a slope. You’re failing to draw a distinction between moderate tax raises (\<10%) and skyrocketing to confiscatory levels. Yes, good for you, you found someone who said 75%. That doesn’t mean everyone who thinks a tax increase is necessarily thinking 75% or more. There’s also the point to be made that investments are typically _substantially_ higher on the expected return than a lottery. Even now, you can pretty much guarantee a safe 3% return on investment barring a complete collapse of the economy. If I can dump 1 million into a fund and be guaranteed 30,000 a year for basically doing nothing but having a lot of money, that…really isn’t anything like a lottery that offers a 1 in 195 million chance to win. If I’m playing those long odds, even at $1 a try, I’m reasonably going to expect a bit more of a payout than $100,000. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [July 16, 2011, 8:36am UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/58 "2011-07-16T08:36:46Z")
> [@Alessan](#): > > Is this a parody thread? Many of OP’s comments seem like self-parodies, but one learns he’s serious. Lotteries are state-run in the U.S.; a large percentage of the take goes to fund State activity; that can be called a “tax”; different states take a different percentage. People are stupid but some aren’t _too_ stupid; there is a “sweet spot” which maximizes state revenue. All this is too obvious for words, but then OP is noted for that as well. ---
**Author:** ![nachtmusick](https://avatars.discourse-cdn.com/v4/letter/n/ac91a4/32.png) [@nachtmusick](https://boards.straightdope.com/u/nachtmusick)\ **Post date:** [July 16, 2011, 10:41am UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/59 "2011-07-16T10:41:16Z")
A well-considered evaluation of the economics of government-run lotteries reveals that the government is out to cheat the populace. What other conclusion could be drawn? I have no objection to gambling, but the worst bet that has ever been offered to me is the state lottery. Far and away the most usurious terms ever offered. I used to throw a dollar or two in the direction of the lottery just for the sake of hope, but now I can’t even talk myself into that. In the vanishingly-small chance that I won, I would be so pissed-off about the amount that the lottery administration stole from me that I couldn’t properly enjoy what pittance they allowed me to keep. I think the lottery parallels the true thrust of government, which is to wring as much coin as possible from the populace. If the lottery were operated in a remotely fair manner, than I wouldn’t object, but the Mafia and corporate Las Vegas are offering much better returns than the Government. This is an outrage. I know I sound like a Tea-party goon when I paint all government with the stain of the lottery scam, but how can such injustice pass without comment? How many other civil authorities operate on the assumption that all is fair in the game of public income and outgo? ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [July 16, 2011, 11:34am UTC](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175/60 "2011-07-16T11:34:26Z")
> [@kanicbird](#): > > Why not making every ticket a winner and tax at 100%. This way everyone could feel good because they win, and the Gov’t would have plenty of money. > > Tonight winning number is 1, same as yesterday’s, and remember every lotto ticket you now buy has the number 1 preselected for your convenience and the other numbers have been eliminated. You’re not thinking big enough. We should tax the lottery at 110%. You win the ten million dollar prize, you owe the government a million dollars. This will provide the government with an incentive to give out lots of big prizes. [Previous page](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175.md?page=2) [Next page](https://boards.straightdope.com/t/lets-tax-lottery-winnings-at-90/589175.md?page=4)