Kinda has a stench of “the wealthy get taxed too much 😢”
The IRS doesn’t get that money. The IRS processes that money and prevents your lottery-ticket-buying-ass from hoarding it all, and redistributes some of that unnecessary wealth to the utilities and services were all invested in together as a society.
If only actual billionaires got taxed that much…
This is what happens if you take it out as a lump sum. If you choose to take your winnings over an extended period of time (20 years or something), it is taxes more like income.
That said, I totally agree with you!
A significant amount is “lost” when you get immediate payout versus the annuity. The lottery will invest and be able to pay out more over the thirty years, thus they offer less the the lump sum
On 1.2 billion over 30 years, the average tax rate will not be significantly different year to year vs the avg tax rate on a lump sum.
The poor smuck probably claimed the lottery as an individual. He should have opened a company and claimed the ticket so that he can expense out a lot of his taxable income
/s
I am 99% sure this is not how it will work in this specific scenario but does otherwise when it’s business as usual.
Sadly, the IRS isn’t properly staffed or equip to go after rich people…
I heard this eloquent way of saying it the other day:
The IRS doesn’t have the money to go after people with money.
Yeah good thing they take it from lottery winners up front.
Like schools
Congratulations to the lottery company who was allowed to advertise a $400m prize as $1.28b.
Yep, that’s the real issue!
Over here it’s not taxed so prizes are smaller but they represent reality!
You’d get significantly more if you didn’t take it in a lump sum
Damn, only half a billion dollars you didn’t have before. Might as well not even bother.
True, it’s too much for any individual either way
So we do all realize that advertised jackpots are annuitized amounts and that the vast majority take the net present value lump sum, which is usually about half the advertised amount, right?
Winner probably got about six hundred million, of which roughly forty percent was taken for taxes give or take state income tax rates.
Not being from the US I didn’t know that. That takes something from being completely unreasonable to be understandable.
I can’t believe some fake rich guy on the internet lied to us!
Still, if they’re not idiots the winner doesn’t have to work again so they’re still good.
That takes something from being completely unreasonable to be understandable.
Why would taxing a gross income of above a billion US$ by ~66% be “completely unreasonable”? Imo taxes for such incomes should generally be higher if anything.
I was with you till the last paragraph. The numbers are already there for you, so I don’t know where 6 hundred million came from.
The $1.28 billion is if you take monthly payments over a term of twenty or thirty years.
Very few people do that.
Instead, they take an up front lump sum payment.
That up front payment is the amount the lottery commission would put into interest bearing bonds to pay out over time, getting to the $1.28 billion.
The lump sum payment is usually about half the amount you would receive if you took payments over time. If this doesn’t make sense, it’s a tangential discussion on the time value of money and its net present value.
I got six hundred million by cutting $1.2 billion in half since this is casual Internet discourse, and I consider very rough cocktail napkin math for illustrative purposes to be perfectly acceptable.
Damn I think I would take the monthly payments. I wouldn’t complain about ~$3m a month for 30 years. Whatever problems you have that money would resolve would probably be resolved in the first month.
But you didn’t need to do back-of-napkin math, at all. He got $433.7 million.
The 433.7 million is after paying taxes on the lump sum.
Nominal Jackpot: 1.2B
Lump sum: ~600 M
Taxes on lump sum: ~167M
Post-tax winnings: 433.7MMy point was that the IRS didn’t take the eight hundred million stated, but probably closer to two hundred million.
But we all love to get angry about anything and everything, especially when we think we’ve scored Internet gotcha points, so enjoy.
I did not know advertised jackpots were annuitized. Thanks!
Is it even worth collecting the prize at this point?? /s
Gotta pay for all those new agents.
The IRS is chronically underfunded. They can’t keep the money, it goes to Aunt Sam.
And btw the IRS has not enough staff to investigatevif rich people pay their fair share, therefore they go mostly for normal people.
Just wanted to point out that the IRS audit rates for the rich are higher than normal people.
[Jay McTigue:] Well, as I said, higher-income taxpayers are indeed being audited at a higher rate than lower-income taxpayers. In fact, the highest-income taxpayers, those making $5 million or more a year, right now are being audited at about 2.3%. Whereas on average the audit rate is less than 1% So there is still a focus on the higher-earning individuals.
source: https://www.gao.gov/assets/730/720478.txt
edit: pulled another GAO report bolstering my argument:
From a report on 2019 data:
“Although audit rates decreased more for higher-income taxpayers, IRS generally audited them at higher rates compared to lower-income taxpayers, as shown in the figure. However, the audit rate for lower-income taxpayers claiming the Earned Income Tax Credit (EITC) was higher than average. IRS officials explained that EITC audits require relatively few resources and prevent ineligible taxpayers from receiving the EITC.”
Please ignore my negative initial vote score, as I have the privilege of being bot-downvoted by CCP sympathizers because of comments on this post https://lemmy.world/post/2338419, there is also the possibility that I’m just an asshole.
Just wanted to point out that the audit rates for the rich are higher than normal people.
As it should be. The problem is that the rate should be 10 times higher than it currently is.
the misleading thing about that statistic is that there are far, far fewer wealthy people than there are normal. even with the rate of audits technically being lower, the number of audits of normal people is still far, far greater, and is where the IRS’s focus truly is
my understanding is that the focus of the IRS should be on those that try to subvert paying their taxes, it seems that they believe there is an increased amount of those people in the wealthy category.
but it doesn’t make sense that they should ignore people trying to subvert taxes in the normal brackets does it? all that does is harm everyone else paying their fair share.
Please ignore my negative initial vote score, as I have the privilege of being bot-downvoted by CCP sympathizers because of comments on this post https://lemmy.world/post/2338419, there is also the possibility that I’m just an asshole.
I never said to ignore it for low income taxpayers, but the statistic you provided is incredibly misleading. Plus the IRS would recoup far more money by auditing higher income taxpayers at much greater rates.
edit: you are right about my assumption on ignoring the taxpayer, that was another person’s comment that I confused with yours, my apologies.
How is it misleading? It’s an incredibly simple statement that the rich are audited at a higher rate than the average person isn’t it? I didn’t say that more wealthy are audited than the common folk because it seems common sense that due to large disparity in population (common vs wealthy), that of course there are more common people audited than wealthy. I’m simply pointing out that this guys statement is incorrect, misleading, and intended to incite anger.
“the IRS has not enough staff to investigatevif rich people pay their fair share, therefore they go mostly for normal people.”
Please ignore my negative initial vote score, as I have the privilege of being bot-downvoted by CCP sympathizers because of comments on this post https://lemmy.world/post/2338419, there is also the possibility that I’m just an asshole.
Your statistic doesn’t support your conclusion. His statement is not contradicted, and is in fact true.
Several articles about how poorer taxpayers are significantly more likely to be targeted:
https://www.cbsnews.com/news/irs-audit-eitc-five-times-as-likely-to-get-audited/
https://www.propublica.org/article/irs-sorry-but-its-just-easier-and-cheaper-to-audit-the-poor
An article about how audit rates are dropping in general, and dropping fastest for those with the highest incomes:
