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Tax Rate Lottery

"Hey, I got 2.1%!" "So? I got 1.5%!"
(+3, -3)
  [vote for,

How about this: don't index rates to income AT ALL. Instead, sell lottery tickets, each of which has a tax rate, which could be anywhere between 0 and (say) 75 percent. You pay the lowest rate from all the tix you buy. Availability of the different rates is on a bell curve - so, very few zeros (1:20MM, say), very few 75, most around, I dunno, 20%. The more tix you buy, the better your chances of winning the zero-percent rate. Revenue from the lottery sales goes straight into the Treasury, and no more arguing about who gets taxed how much.
smendler, Dec 06 2010

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       As your income would still affect how much tax you had to pay, those with higher incomes would buy low tax rates from lower income winners for more than the low income people would save in tax.   

       If the high income and low income people both benefit, the only loser is the treasury, unless the chance of getting a ticket with a low tax rate is extremely small and only 1% lower.   

       This would turn the lottery from a tax on hope to a tax on tax.
marklar, Dec 06 2010

       Trading in tickets between taxpayers could be forbidden.
pocmloc, Dec 06 2010

       [marklar] Damn, that's smart.   

       [pocmloc] Why forbid trading in tax rates? Much of government tax revenue is transfer from wealthy to poor, no? If more money goes direct from rich to poor (as payment for low tax rates), and less goes indirectly via government, mightn't that be a good thing? Free market enthusiasts would definitely say so. Administrative costs of the transfer might be less, and the poor would have more say in how the funds transferred to them would be spent.   

       But [marklar] the high income people only "benefit" in comparison to the present system; it's still not as good for them as lower taxes would be.   

       Hmm, since there's uncertainty about the future income of a particular person, could there be a futures market in tax rates? Might be interesting to model an economy with freely tradable randomly assigned tax rates. Not sure this is a good idea, but it's starting to seem like an *interesting* one. [+]
mouseposture, Dec 07 2010

       [MP], [Mark] has already explained. The rich would pay the poor to swap to lower tickets. The treasury's total tax take drops well below mean. End of experiment.   

       It's not like you can currently trade in tax codes. I have a low income so am in the lowest bracket. I can't do a deal with a high-earning city worker to exchange tax codes, so he need only pay 10% on his super bonuses, in exchange for him subbing my punitive higher rate tax on my minimum-wage income. If we tried that wheeze I think HMRC might be interested.
pocmloc, Dec 07 2010

       So if one buys a ticket which returns a rate higher than one is currently paying, doesn't on just 'lose' the ticket?   

       This would only appeal to the kind of person daft enough to buy into a lottery with a staistically insignificant (1.4E7 : 1) chance of winning.   

       Also, there is much more to gain if the player has a high income, so the rich get richer and the poor get poorer.   

Twizz, Dec 07 2010

       Rule 1: You must buy at least one ticket. Anyone not buying a ticket will be given one by HMRC and the cost of said ticket (plus a £10 administrative fee) will be added to their next tax bill.   

       Rule 2: Each ticket is valid only for the year of issue. You must buy a new ticket each year.   

       I think that 0% and 70% are arbitrary limits. Let the distribution of tickets be a Normal distribution centred on, say, 40%, depending on the national budget and economy. The standard deviation could be whatever you liked. I would prefer a larger s.d., meaning that some people might get a 700% tax bill, wiping out their life savings, while some lucky worker might get a -3000% tax bill, i.e. a windfall refund of their entire life’s earnings.
pocmloc, Dec 07 2010

       Is it fair?   

       If the stated aim of the idea is //no more arguing about who gets taxed how much// how does this solve the problem?   

       You still have arguments, of course they are no longer based on the old tax system, since it has been replaced by the new one - but arguments they would still be.   

       Under what tax system would you effectively be able to stamp out all arguments? You can't please all the people all the time.
zen_tom, Dec 07 2010

       You could of course make the tickets non- transferable*, which would solve the trading issue.   

       More interestingly though, I was thinking that you could currently 'buy' someone's tax rate. If I earn a dump load of money, what is to stop me employing a number of servants? This works out great for them, but you are surely wondering how I would ever get the money back.   

       Well, you could either do it below the minimum tax-free non-relation transfer rate (which from memory of about 10 years ago was something like 2,400 pounds per year, per person), or you could open a company which sold them a service of some kind. You would be subject to VAT in most cases, but I think there are sectors, such as (ironically) financial planning, which are exempt or have reduced VAT.   

       *I thought of using the word non-anonymous... do doo du do do.
marklar, Dec 07 2010

       Tax code lotteries are already is baked by HMRC
MaxwellBuchanan, Dec 07 2010

       Well, sort of ... everyone loses.
8th of 7, Dec 08 2010

       If I had loads of income, a very low tax rate would be very valuable. Therefore I would buy ticket after ticket, amassing hundreds or thousands of tickets looking for the super low rate.   

       Or my friends and I would buy some Republican congressmen (what the hell - lets get the whole party. We're filthy rich!) so that they would hold the middle class hostage to ensure my very low tax rate and uninterrupted money bin wallowing.   

       Garcon! This money is not fresh. It is all wallowed out. Exchange it for some new!
bungston, Dec 08 2010


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