Each annual personal tax return filed on time with the IRS should include an OPTIONAL chance to pay some $ amount (or perhaps a percentage of that filing’s tax liablility or return) to join a yearly lottery wherein the winner is exempted from federal payroll tax liability for life. Secondary prizes could include 100% return for that current year.
Some limitations may have to apply to prevent such exceptions from becoming a commodity. Non-transferrable; possibly limited to some upper threshold, etc. The idea would be to exempt an average American (one per year) from paying any federal payroll taxes (i.e., 100% return, or don’t file at all).
A National Tax Lottery would:
- gamify an arduous and maligned process, filing taxes. Limiting the number of tickets, or doing the drawing on tax day would incentivize early filing/payment.
- incur a relatively small cost for a huge public relations return. (The average person pays $15K federal taxes annually.)
- challenge the current federal worldview, that taxation is a foregone conclusion
I asked ChatGPT to further flush out this idea, an here’s what it came up with:
Your idea of a National Tax Lottery is compelling as it merges tax obligations with the appeal of a lottery. Here are some considerations to further develop this policy, covering the mechanics, restrictions, and benefits of such a system:
1. Participation Structure
- Entry Mechanism: Taxpayers could enter the lottery by paying a set dollar amount (e.g., $10 or $20) or electing a small percentage of their federal tax liability/refund to participate. The latter could ensure proportional access across income levels, making the lottery feel inclusive.
- Cap on Entries: To prevent wealthier taxpayers from skewing the odds, limit each taxpayer to a single entry. This makes the lottery more egalitarian and reduces the risk of wealthier individuals viewing entries as “additional chances.”
- Frequency of the Lottery: A yearly drawing on April 15 (or “Tax Day”) could add a sense of national excitement around an otherwise stressful time.
2. Prize Structure
- Primary Prize: Lifetime federal payroll tax exemption. This prize would relieve the winner from the standard federal payroll deductions for the rest of their life, freeing them from a significant financial burden.
- Secondary Prizes: A full tax refund for the current filing year or a payroll tax refund for one year. Secondary prizes could motivate broader participation while maintaining the primary prize’s exclusivity.
- Non-Transferability: Ensure that any prizes are non-transferable, meaning they cannot be sold or passed on, which would help prevent their commodification.
3. Eligibility Requirements
- Income Caps or Floors?: Consider eligibility caps, such as income not exceeding a certain threshold, to ensure the lottery benefits middle- or lower-income individuals rather than high-income earners.
- Exclusions for High-Income Earners?: Exclude those with high net worth or high income from qualifying, aligning with the intent to assist everyday Americans.
- Limited Maximum Annual Benefit?: Rather than excluding any tax-payers based on income or net worth, the total forgivable tax liability for any given year could be limited to, say, $250K/year.
4. Revenue and Cost Analysis
- Expected Revenue: Entry fees should be priced low enough for mass accessibility but high enough to generate substantial revenue. For instance, if 10% of filers participated at $20 per entry, it would generate millions in revenue, which could help offset costs and even fund other taxpayer services.
- Cost to Government: The annual payroll tax cost for the winner could be calculated based on projected average earnings and indexed to inflation, making it easier to budget.
5. Public Relations and Social Impact
- Incentive to File Early: By linking the lottery with tax filing deadlines, you encourage people to file early, which would help the IRS manage workloads better. Any tax filing extension would necessarily exclude the late-filer from participating. To further incentivize early filing, any returns filed ‘N’ months early might earn additional ‘N’ lottery entries.
- Gamification of Tax Filing: This could foster a more positive perception of the tax filing process, turning it into an event that some people look forward to instead of dread.
- Challenging Perceptions of Taxation: Such a policy could make taxpayers feel less burdened by taxes, especially those who view taxes as compulsory with minimal benefit.
6. Ethical and Societal Considerations
- Fairness and Accessibility: Ensure that the lottery does not disproportionately appeal to lower-income individuals who may view it as a way out of tax obligations.
- Avoiding Lottery Dependency: Emphasize that the National Tax Lottery is an optional perk and not a replacement for structural tax reform or relief programs.
- Transparency: Publish yearly reports on funds raised through the lottery, total participants, and demographic breakdowns to maintain public trust and support.
7. Implementation Challenges
- Legislation and Public Buy-in: Implementing this policy would require significant legislative action and public discourse to address concerns about fairness, feasibility, and the ethical implications of such a lottery.
- Management and Logistics: The IRS would need a robust system to handle entries, conduct the lottery, and administer lifetime prizes efficiently.
Summary of Benefits:
- Increased Compliance: Gamifying tax filing could improve filing compliance, especially among younger taxpayers.
- Increased Revenue for Government Services: Entry fees would help fund public services, offsetting the cost of tax exemptions.
- Social Good: Creating a once-in-a-lifetime opportunity to be “free from taxes” could boost morale and foster a more positive view of the federal government and tax system.
A National Tax Lottery could transform the tax filing experience, boost morale, and introduce an element of hope in an otherwise routine process.