I think taxes should be based on a 5-year rolling average, to ease the burden for people who have high income only once in their life. Winning the lottery or patenting an invention that makes you rich is the American dream. Let’s tax high earners but show some lenience for folks who have a once in a lifetime windfall.
A rolling 5 year average would mean you’d be taxed overly heavily for years after a windfall.
Given that winning the lotto is often financially disasterous, getting taxed heavily after you’ve already blown the cash could cripple people at their weakest point. Making the lottery more appealing is also a net loss to society.
It opens another potential avenue for tax avoidance schemes to game.
Getting rich quick almost always requires doing something awful. If it just required hardwork or smarts, plenty people got that. We should absolutely not encourage people to aim for once in a lifetime “get rich quick” payoffs.
Doing the median instead of the mean would solve that problem. The post tax wouldn’t be as large then
You’d be in a lower tax bracket for the year that you won. If it bumped up your tax bracket the following few years, it would still be beneficial because you’d have saved a lot the first year. I don’t know though, this isn’t really an idea about finance or taxes, I just don’t think it’s right that someone who makes a million once gets taxed the same as someone who makes a million every year for 40 years.
You’d be taxed less when you already have a lot, but it’s common for people to blow a windfall and end up much worse off, so being taxed more heavily years later could be really devasting for many.
I can understand wanting to see some lucky shmuck maximize their winnings. But i think it would seem almost cruel to adjust for this one rare situation when so many more significant financial injustices exist.
Yeah agree
They don’t get taxed the same. The person making that money for 40 years is paying 40 times as much.