Taxes on Inheritance and Lottery Winnings

[dazzleman]

Both taxes should be eliminated.

I disagree.  Lottery winnings should definitely be taxed as income in my opinion.  There's no reason to give people who win the lottery a free pass when working people are taxed.

Inheritance is a bit different, since it was already taxed at the time it was earned.  Truthfully, I am ambivalent about inheritance taxes.  

On the one hand, the money has already been taxed, so it is in a way double taxation on the same money to tax it again when the holder of the money passes.  But the money does represent a form of income to the person receiving it.  I think the right answer on inheritance taxes is to tax only large estates, with the amounts indexed to inflation, at a low rate.

[dazzleman]

Inheretance the same, lottery lower

I'm curious as to why people think lottery earnings should be taxed at a lower rate than income.

Is it because of the expectation that poor people win the lottery?

Why should working people pay more tax, effectively, so lottery winners can pay less?  I can justify lower taxes on activities that CREATE wealth, which is why I think it is appropriate to have a lower capital gains rate, but lotteries don't create wealth at a macro level; they only redistribute it.  I see no reason the person receiving free wealth should get a free pass.

[dazzleman]

Both taxes should be eliminated.

I disagree.  Lottery winnings should definitely be taxed as income in my opinion.  There's no reason to give people who win the lottery a free pass when working people are taxed.

Inheritance is a bit different, since it was already taxed at the time it was earned.  Truthfully, I am ambivalent about inheritance taxes. 

On the one hand, the money has already been taxed, so it is in a way double taxation on the same money to tax it again when the holder of the money passes.  But the money does represent a form of income to the person receiving it.  I think the right answer on inheritance taxes is to tax only large estates, with the amounts indexed to inflation, at a low rate.

I agree on inheritance, that it was already taxed when it was earned (not that large estates should be taxed, though) but the lottery, at least the way I see it, is more of a donation than an income.  Or kind of like insurance even.

How can receiving potentially millions of dollars be considered a "donation?"  It is also far too random to be considered insurance.  It is gambling, and gambling earnings are taxed as income.  To call it insurance is a perversion of the whole idea behind insurance, since insurance has a guarantee that it can be collected under circumstances, while the lottery offers nothing of the sort.

[dazzleman]

Being hit by a drunk driver is pretty random, too.  And the lottery has a guarantee that it can be collected if you pick the same numbers as they do.  I'm looking at it as a completely black and white situation.  In both insurance cases and with the lottery, you give them money and if something specific happens, they give you a huge load back.  It's up to the lottery commision/insurance company to decide what has to happen.

I really don't buy into your argument at all.  Insurance provides financial protection against certain specified events, and insurance money in theory is to cover the cost of those events, and usually not fully.  The lottery is based on a contrived picking of numbers, and there is no pretense that lottery earnings are anything but massive amounts of additional income.

[dazzleman]

I understand your arguement and I see how mine is flawed but I still really don't see the lottery as an income. That's all I can say at this point.

We'll have to agree to disagree.  When you have a check for $1,000,000 or whatever the amount is arrived every year, believe me, it's an income.

[dazzleman]

Taxes on wealth gained by luck (including the luck of being born into a wealthy family) are some of the most important taxes we have.

You have a point, but I would say that wealth that there is a fundamental difference between inheritances and lottery winnings.

Lottery winnings are simply a redistribution of wealth from those who buy tickets to those who happen to pick the right combination of numbers.

Inheritance is the passing of wealth that has been in some way earned, presumably, by a loved one onto the people of his/her choosing.

As I said, I'm not necessarily for total elimination of the inheritance tax, but I can't view inheritances in the same light as lottery winnings.

[dazzleman]

Inheritance should be higher. On reason: Paris Hilton

Lottery should be th same.

The Paris Hilton example is probably the one thing that could convince me to agree with you.  She is a very good example of the evil side effects of too much wealth.  Her parents are also trash, which is a big part of the reason she's the way she is.

A television reviewer once said, about her show "The Simple Life" that watching her whole attitude would be enough to turn the most committed capitalist into a Maoist.

[dazzleman]

Taxes on wealth gained by luck (including the luck of being born into a wealthy family) are some of the most important taxes we have.

There is a lot of truth in this, but keep in mind that successfully inheriting involves not only the luck of birth, but 40 or so years, on average, of sucking up to the horrible old misers.

I once heard a saying "He who marries for money earns it."  I think that could apply to any type of inheritance.  And you are a prime example of people who have not been well served or blessed as a result of being born into a family with money.  You will be the last generation to have wealth in your family.

[dazzleman]

Taxes on wealth gained by luck (including the luck of being born into a wealthy family) are some of the most important taxes we have.

There is a lot of truth in this, but keep in mind that successfully inheriting involves not only the luck of birth, but 40 or so years, on average, of sucking up to the horrible old misers.

I once heard a saying "He who marries for money earns it."  I think that could apply to any type of inheritance.  And you are a prime example of people who have not been well served or blessed as a result of being born into a family with money.  You will be the last generation to have wealth in your family.

Yes, I do not plan to have any children.

That's not what I meant.  There wouldn't be anything for them even if you did.