Last week, the biggest lottery ever was in the news.
Lotteries form an interesting natural experiment. Winners of big lotteries become 1) instantly rich, and 2) are not encumbered by questions about talent, effort and perseverance.
So how much should we tax them? Time for a controlled survey:
Less than a quarter of respondents chose a tax rate of 30% or higher on any level of lottery winnings. The vast majority thought that a reasonable amount to pay was much lower, with the average being only 15%. Democrats and Republicans differed only a little: The average rate preferred by Republicans was 14%, compared with 17% for Democrats.
Those rates are less than the average rates currently paid by the rich, far below current marginal rates on the rich, and way below rates commonly proposed by Democratic policy-makers.
At a minimum, these rates suggest that a lot of the desire for higher rates has to do with attitudes towards specific rich people than towards rich people in general.
Read the whole thing, entitled “Gaines and Rivers: What's a 'Fair' Tax for the Mega Millionaires? ” in the April 10 issue of The Wall Street Journal.