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Uncle Sam Spoils Dream Trip To Space
gollum123 writes about a dream come true and a dream dashed. Brian Emmett, a software consultant from the San Francisco Bay area, entered a contest sponsored by Oracle in 2005. He answered some questions on Java coding, won a free trip into space, and then reluctantly gave it up. The latter decision came once he had computed the taxes he would have to pay on the $138,000 prize — roughly $25,000. From the article: "Since the Internal Revenue Service requires winnings from lottery drawings, TV game shows, and other contests to be reported as taxable income, tax experts contend there's no such thing as a free spaceflight. Some contest sponsors provide a check to cover taxes, but that income is also taxable."
Saw it referenced several times in the article, but the address was never quoted.
The entry in question is the top one on that page.
It is similar to what happens in countries like the Netherlands (or other nordic countries) where people *avoid* pay rises because sometimes having a rise of 10% they have to pay more taxes and end earning less than what they earned before the "raise".
In the 6 years that I've been in the Netherlands (3 as a manager), I've never known anyone to turn down a pay raise. (If you know such people, please let me know... we might want to hire them.) The system does not work as you describe. Making more money always gives you more money.
There may be other reasons to worry about a high income, such as being forced to leave rent controlled housing, but this is not tax related.
That would be considered income, because no "arms-length" transaction would have resulted in a sale of a trip into space for $1. Accordingly, the difference between the fair market value and the $1 was a gift to you. Gifts are income. You can even give someone money by not taking money away from them! Observe: I extend my neighbor Bob a loan this year for $5,000. Next year, I say "You know, forget about that loan". BLAM. He has to declare an extra $5,000 (plus fair interest!) in income, and I have to fill out a Form 1099-C attesting to that amount (which, naturally, tips the IRS off to the fact that if Bob doesn't disclose the value of the loan was forgiven to go after him).
All sorts of things are income, although many aren't routinely claimed as such. Ever won a soda at McDs during that Monopoly promotion? Income. Found a $10 bill on the sidewalk? Income. Taken a pen home from work? Income, unless you returned it. The difference between these and the space trip is that if you had somehow neglected pay $25,000 worth of taxes because of your income, as opposed to a few cents, the IRS *will* hit you like a ton of bricks.
Help poke pirates in the eyepatch, arr.
No. When we advertise a prize of $100 million paid over 29 years (30 payments), we actually have less than $50 million in cash. When someone wins the jackpot and wants cash, we give them all of the cash in the jackpot prize pool. If the winner wants the annuity, we invest the $50 million in cash to fund the annuity payments. [snip]
Federal and State Income tax apply to whatever income you actually receive in a given tax year, whether it is wages or lottery prizes. If you take the cash amount (say $50 million), then you pay income tax on $50 million). If you take the annuity (say $100 million), then you pay income tax on the money you actually receive each year. Just like your wages, a withholding amount is required to be taken out immediately. The lottery will send you a W2-G form and you figure your actual tax at tax time.
In the US, taxes are unconstitutional for any reasonable interpretation of the constitution.
Prior to 1913 you would be correct; however, quoting the 16th amendment to the US Constituition, "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."
I laughed at the weak who considered themselves good because they lacked claws.
Well, I don't like being an ass... but I'm good at, so here I go. OK, lets say there is a 25% tax on gifts. You just won a 100,000 item where they promised to pay your taxes. The equation for the total amount they'd have to give you to cover taxes is as follows:
x = 0.25(100,000 + x) ---- Thats 25% of the sum of 100,000 and itself
4x = 100,000 + x
3x = 100,000
x = 33,333.33 ----- Thats it, it pays for itself and the gift. Tada!
Occam's razor is the blind faith in the natural selection of least resistance and in universal oversimplification. -- EF
Under the scenario you described, you would still be taxed. You'd have to sell the luxury car to get money (people wouldn't completely revert to barter) and that would have to be reported as taxable income. True, with a little work, exempting non-money compensation from taxation *could* gradually lead barter networks to form, but not in the scenario you've described.
That said, in order for the trip not to be free, they'd have to pay the $25,000 tax, then (as the summary notes) pay the tax on the $25,000 tax payment (since that's additional compensation), then the tax on the tax on the tax, etc. Luckily, the series converges!
More importantly, who decided that the trip was worth $138,000? Is there a liquid market in spaceflights? Why couldn't they declare it to be a special, "discount" trip worth $5? Note that this is similiar to the record industry declaring the "value" of "stolen" music -- how much would it really have sold for? And note that unlike the luxury car, this good is not transferrable.
Apology to Ubuntu forum.
That sounds A LOT like here in Finland, except here isn't that kind of insecurity. Insecurity yes, but not deadly.
Here, there's a lot of talks, stories etc. (rarely gets to the press, but a few does) about security companies employees beating people for no reason, but that's the top of the iceberg. You gotta watch over your shoulder on our capital city and nearby cities
when going to trainstations, there's people who might try to beat you off just because you don't give them a cigarett or you look
too good for their liking or rich.
None of those are Finnish, but mostly immigrants and such. (Now i will be called a racist).
If you are jumped and you defend yourself, you will at bare minimum get fines, probably jail. I did this once, i was 16 (that day
actually was my birthday!), and that guy was ~35yo weighing ~150kg. Defended myself at all means possible, i got sued by
goverment, initially with attempted kill. Finally, they decided i was innocent, but still fined me for 120euros... and all i got
was 180e per month back then. What saved me was that i was still a teenager, but it did require a very good lawyer.
Back on the subject, taxes are insane here too.
If you are an employee, you will pay personal tax of upto over 60% + unemployment fees (2,5%) + church (1%) + health (1,5%) (hope i remember those right), if you happen to have money in the savings account, 28% tax from interest.
Everything has VAT 22%, except food 17%. Gasoline has total tax of ~70%, Diesel a lot less but don't remember the pct at all, it
costs ~30% less, while in truth it costs more to manufacture.
If you buy a 2000e car from Germany, you might have to pay even upto 8 000e of taxes on it if you are unlucky.
If you are entrepreneur, minimum total taxation is almost 50%, for other company form it's ~30% but then you get also personal
tax on top of that.
Also, from all sales you have to pay VAT, but fortunately if your payed VAT (when you buy something, loss) exceeds the amount of
stuff you sold or equals no VAT to pay, and i think they even pay you back if you've paid too much in VAT taxes.
A real life example: monthly salary ~1350e, you get in your hand ~1050euros, apartment (cheap but spacy for one, about 50m2)
~450e, food for the month (1person) 150e, cheapest work travel 40e, and electricity ~30e/month, internet connectivity ~30e/month
and ~+220e for apartment from goverment.
I would think that's the minimal requirements for somewhat enjoyable life, and you are left with 570euros/month.
Currently, if you own a car minimum payments for the year are yearly inspection, car tax and traffic insurance.
Traffic insurance is lower for newer and more expensive cars. My -84 Corolla yearly insurance is ~880e, car tax ~100e, inspection
is ~50e. That's over 1 000e just to keep the car, and the car costs ~1200e. Now they are trying to remove the car tax, install
GPS on every car (or some other tracking method) and issue a tax for every km you drive + add an emissions tax, which naturally
be higher for older & cheaper cars. Top that of that driving with natural gas (aftermarket installation) as a civilian, not
working on transportation business and not a car used for work is not allowed, and what i understood from department's texts,
the fine is over 300euros per day!
For all the taxes you pay here, only thing working somewhat well is social safety net (you will always have apartment etc. if you
are even somewhat sane, and bother to fill out couple forms). Education is bad, healthcare seems to be more like deathcare etc.
Oh yeah, own a house & some land? You own that land only 1m deep, someone finds gold under 1m and wants to digg it, they are
allowed to. City wants the land? No worries, you'll still get something like Market Value -40% for it.
To top that off, summers they lay on the roads saltwater "to keep dust down", which actually makes the roads slippery, and what
when it dries? You get dust + salt!
During winters, they lay ou
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