You said it! I resent the lottery authorities who hit me with a $1000 tax if I don’t play the lottery! They getcha one way or the other, those Fascists! They should try to collect more money in a way that’s voluntary instead of by force like the lottery.
Why should government be held to a standard of fairness? The free market is not constrained by what is fair and what is not, only by what is most economically efficient. Fairness has nothing to do with it. Seems rather disingenuous to advocate privatizing all public services and subject consumers to the dispassionate mechanics of the free market, them whining about government not being fair.
Actually, most lottery winners are broke again in a few years… because they don’t know how to manage that much money.
The main point of the Laffer Curve is that you don’t know where you are on the curve, or what shape the curve actually is. It’s very erroneously drawn as if it goes smoothly from 0% to 100% tax rates.
No, what I’ve done is bring this concept back into people’s consciousness. When discussed in terms of the lottery it was intuitively obvious that increasing the tax on gains reduced the desire to risk.
Right now the lottery is taxed at 35%, and as noted that isn’t advertised. How many people do you think would stop playing if they new that upfront?
The dozens of threads on “taxing the rich” are in effect discussing this very point–taxing that next $1million at a progressively higher rate. And in each of those threads the notion of the Laffer Curve is quickly dismissed noting that a rich person will still be happy with smaller and smaller returns on the same risk (investment).
I’m not sure that says what you think it does. The expected return on a lottery ticket is $1million on a $5 ticket, that’s a lot higher than 3%. Typical black jack table pays 2:1, a 200% return on investment.
No, it’s the same thing, putting money at risk in the hopes of a potential payout. I like that you worked the unearned concept in there. What’s different are the odds. People definitely wouldn’t play the lottery if a $1 ticket won then $1.03, no matter how guaranteed.
Now this last statement is the point of this debate. For the 1 in 195 million chance to win 90% tax rate is way too much, s translate that into a investment risk. An millionaire entrepreneur that wants to open another store is gambling. She’s about to put up hundreds of thousands of dollars to make another million dollars. If we increase the tax on that next $1million, it should seem intuitively obvious to everyone she’ll be less likely to take the risk.
Instead we need to demonize the entrepreneur, diminish her efforts, call her greedy, call her selfish, and then increase the top marginal tax rate.
Well, one out of five isn’t all that great a game result, but thank you for playing.
You seem to be a bit behind, we’ll wait for you to catch up.
It’s intuitively obvious that taxing at confiscatory rates reduces the desire to risk. You have shown nothing more than that.
But I’ll play along. I’ll agree that as you raise the price or lower the return, you will get fewer people who wish to participate. Basic, basic economic theory says that this isn’t a bad thing, that there is a sweet spot which maximizes revenue. Sure, if you price/tax a good/winnings/profit at $5, 150 people may participate as opposed to only 100 people who’d participate if the price/tax is $10, but you’re still going to get more money out of the 100. I mean, come on. I took a single Economics course 10 years ago and got a C in it, but I remember that.
Naturally, without actual data to analyze I can’t say that we’re absolutely on the side of the curve where raising taxes will earn us more revenue despite the people who may choose not to participate, in whatever form that takes, but by the same token you can’t say the opposite. And frankly there’s more historical support for my view, not yours.
It’s easy to argue against responses that are so rare as to be a strawman. My take is that if the collective will of the voters is to have a high level of social services – and don’t kid yourself, the “keep your government hands off my Medicare” hypocrisy is very real – we should be honest enough to have a high tax rate to pay for it. No anti-capitalist morality required. A progressive tax structure has been shown to work, and is better than the alternatives (permanent deficits or a broadly flat or regressive structure), unless society decides to curb spending.
Sorry for the double posting, but I realized I wanted to respond to some other stuff too.
Not so many as you’d think. Some certainly would, but as I showed in my previous post the government is probably just as well off without those people as with them. And it certainly wouldn’t be everyone; though this is anecdotal, most of the people I know who play the lottery would be mildly put out that they weren’t earning the full amount, but $35 mil is just as good as $50 mil when it comes to living comfortably.
Er, no. Expected return takes probability into account. If the Powerball is $50 million with odds of 1 in 195 million, that’s an expected return of just under 26 cents. Given that you’re paying $1, this is clearly a losing strategy. On the other hand, a 3% rate of return with a 100% probability has an expected value of 3%. At that point, you’re only talking about the scope. And even then:
Yeeeeeees, they would. If a $1 lottery ticket had a 100% probability of returning $1.03, then the lottery commission would go bankrupt. I myself would think absolutely nothing of dropping $100 on the lottery, getting $103 back, then buying 103 tickets on the next draw. It’ll be slow, but it’s guaranteed to get me more than doing nothing with that $100 at all. If someone doesn’t take part in that, it’s only because 3% on that scope is hardly worth bothering with. It’s when you get into the millions that you start talking about real money.
And, again, while I don’t deny that entrepreneur has some risk, presumably that entrepreneur is smart enough to have calculated the odds to determine how good a risk it is and what the expected value will be. Entrepreneurs do not play the lottery, at least not the same kind as what you find in convenience stores.
And “less likely to take the risk” does not mean “will not take the risk.”
And then they have nothing to tax.
Doesn’t matter much though. As I pointed out earlier, its already an 80% tax rate. When someone wins $100 million, the government ends up with $400 million. So the proposal is just to up the government take to $450 million. And as it turns out, the money collected by the government is just used to lower taxes and keep racking up debt.
Of course the market is constrained by what’s fair, because there is competition. Why do you think the average vig for blackjack is only about .7%? When governments keep 30-50% of lottery ticket sales, private casino games can be found with house vigs as low as .2%, and the average for private slot machines is 0-8%.
I used to play poker in an underground club that was completely unregulated - the house collected a far smaller vig than the government-regulated casino down the street, which is why we all went there.
If profits are the only thing that matters and fairness doesn’t enter into it, how could that possibly happen?
No one will play.
Sam Stone has already provided a fine example of where you’re wrong, but you’re so wrong I felt compelled to post myself.
Although your post is brief, it is riddled with so many misunderstood falsehoods, reinforcements of classic left-wing statist victimization, and willingness to trade personal liberty for security, that I had to read it in amazement - twice - just to get the full measure.
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The free market doesn’t “do” anything. It doesn’t “subject” any consumers to anything. It is not an actor with intent or objectives. All it is, is a collection of voluntary decisions between consenting parties.
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You got one thing right…it’s dispassionate nature. That’s good. That’s a good thing. That means there is no person wielding force to subject anybody to aribitrary and capricious decisions, based on the enforcer’s own personal or moral agenda or political aims.
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So yes, the free market is by it’s very definition “fair” (unless you want to get into the subject of negative externalities, which I’m sure was not your intention…we can talk about that in another post if you are so inclined).
It could not possibly be any more fair. There cannot be anything possibly more fair than two consenting adults coming together and agreeing to a voluntary transaction. If one party doesn’t think it’s fair, they won’t show up.
So yes, the free market is absolutely constrained by what is fair. Otherwise those voluntary transactions will not occur. I can go out and try and sell a glass of lemonade off my front porch for $25 a pop. I won’t have much success. Guess why.
- Government, on the other hand, has every opportunity not to be fair. Government officials wield the power of law, regulation, and the legal use of the gun.
So if I walk up to your porch and take your lemonade without paying, might I expect you to use your firearms to prevent me, or at least call the police to use the power of their guns to arrest me?
Living in our society, which exists only because of our laws, demands only that you obey all of them, not just the ones you approve of. If you violate the law requiring the payment of taxes, the liklihood of being hauled into court at the point of a gun is roughly the same as if I stole the lemonade off your porch.
That’s all I really needed to show, now it’s a question of what is considered confiscatory. Obviously 90% is, 35% isn’t. Looking back through history it was actually 91% in the 50s, 70% in the 70s, 50% under Reagan, and 40% under Clinton.
And that’s all I needed to remind people of because all too many either missed that day in class or chose to ignore it. Increasing taxes on the rich actually means increasing the top marginal tax rate, which will have the effect of reducing participation.
On reflection, I get the sense that even those who understand the Laffer curve have forgotten there is more to it than simply maximizing government revenue, such job creation that results when the rich take risks with their money.
But again you’re simply focusing on the tax revenue aspect of increasing taxes, while neglecting the real world consequences of an individual investor that decides not to participate. It’s entirely possible that higher tax rates might increase government revenue, while at the same time inhibiting job creation.
So with unemployment still high, are you willing to risk stalling job creation?
The same could be said about drastic spending cuts, yet I don’t see you thinking twice about that.
Job creation doesn’t begin with entrepreneurs. It begins with consumers who have money and want to spend it. All the tax breaks in the world won’t get businesses rolling if there’s no market for it. Remember what we were just talking about with calculating risk? If an entrepreneur looks at the market and doesn’t see demand, they’re not going to open up a business and hire employees even if it’s tax free. And if a market does exist, an entrepreneur will be motivated to open a business and hire employees whether the tax is a moderate burden or a slightly higher moderate burden. Maybe there would be a few entrepreneurs who are okay with 30% tax but not 35%, but that’s their loss. Means their competitors can own a larger share of the market and make the profits and hire the employees the ideologues didn’t.
The tax rate can’t be 100%. That’s obvious. It also can’t be 0%. That too should be obvious unless you’re an anarchist. That means the optimal tax rate must be somewhere in the middle. But the implications of your argument suggest that no matter how low we take the tax rate, it will never be acceptable because some entrepreneurs won’t want to take on that burden. Indeed, we have many ideologues in this country who want a 0% tax burden and anything more is unreasonable. Why should we bow to them? Why can’t we tell them “tough, your loss, more market share for us”?
Pay your goddamn share.
The “Laffer Curve” is a joke. It’s just a propaganda tool used by the Right to justify cutting taxes on the rich. Somehow, we always just happen to be on the “taxes too high on the rich” end of the curve.
In reality, no one knows where we are on the curve, or even what shape it is. It’s useless.
Are you willing to risk stalling job creation by keeping taxes low? After all, low taxes for the rich means that consumers have no money to get our consumer driven economy running, and there’s no reason to hire when there’s no demand for any products you make because people can’t afford them. Heavily tax the rich, hand out their money to the common people to get the economy going and boost job creation.
Great idea. Let’s expand it to the genetic lottery as well. After all, it’s only random chance that you were born to the parents you’ve got. Tax all inheritance over $1 million at a 99% rate. Use the funds to horsewhip every banker and hedge-fund manager who screwed over the American working class. Then shoot them.
Yes, competition is good. Imagine what it would be like if the government took over some key sector of the economy - let’s use computer operating systems as a random example - and created its own standard. And then used its power to push its standard. You could end up with a situation where ninety percent of the computers in the world were using this operating system and there was no effective competition.
Thank god private enterprise and the free market saved us from such a fate.