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Uncle Sam Spoils Dream Trip To Space

kdawson posted more than 7 years ago | from the taxing-the-vacuum dept.

United States 656

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."

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656 comments

A dream come true? (5, Funny)

Whiney Mac Fanboy (963289) | more than 7 years ago | (#17797514)

It may have been a dream dashed for Brian Emmett, but it most certainly was a dream come true for headline writers [google.co.uk] . They leave no cliche unturned:

* There are no free rides to outer space
* Dream free trip to space brings black hole in wallet
* Win a free ticket to space? Read the fine print
* Taxes ... the final frontier for space rides
* Space tourism yet to take off
* Free trips to space pose some taxing dilemmas

etc etc etc.

Re:A dream come true? (2, Insightful)

b100dian (771163) | more than 7 years ago | (#17797542)

Not to mention the obviousness that the state does not help you winning things - therefore one shall not be "taxed" for this
(otherwise, all participants would have to pay an equal share of taxes, since their presence at the "lottery" is a service the state grants, and the winning of it _is not_)

Re:A dream come true? (3, Insightful)

Whiney Mac Fanboy (963289) | more than 7 years ago | (#17797586)

Not to mention the obviousness that the state does not help you winning things - therefore one shall not be "taxed" for this

Not that I particularly agree with the state taxing winnings, but they don't help you work, yet tax your income. How is winning something different?

Re:A dream come true? (4, Insightful)

b100dian (771163) | more than 7 years ago | (#17797648)

I disagree - take a look here [wikipedia.org] .
Now, without "enforcement of law and public order, protection of property, economic infrastructure (roads, legal tender, enforcement of contracts, etc.), education systems, health care systems" would you be able to work?

Re:A dream come true? (2, Insightful)

Whiney Mac Fanboy (963289) | more than 7 years ago | (#17797682)

Now, without "enforcement of law and public order, protection of property, economic infrastructure (roads, legal tender, enforcement of contracts, etc.), education systems, health care systems" would you be able to work?

Well, without all that would you be able to collect your prize?. Would Oracle have been able to organise the contest?

Hmmmmmmn. I still don't really see a difference between govt taxing earnings & govt taxing prizes.

Tax the organiser (5, Interesting)

TapeCutter (624760) | more than 7 years ago | (#17797692)

They attack this problem in Australia (and other places) by taxing the organiser of the lottery, all advertised prizes are for the "after tax" value, if it says "First prize: $1M" and you win, you get $1M. The taxman doesn't hassle you because he took his cut before you got your cheque. Not sure how you would go if you won a foriegn lottery?

OTOH: Get a $50K reward from Loyds of London for bravery (of the "are you insane" variety) that saved an oil tanker from sliming the costline near Perth and you will have to pay tax as if it was additional income for that year, ie: the taxman will take 30-50%.

Re:Tax the organiser (4, Interesting)

zCyl (14362) | more than 7 years ago | (#17798014)

They attack this problem in Australia (and other places) by taxing the organiser of the lottery, all advertised prizes are for the "after tax" value, if it says "First prize: $1M" and you win, you get $1M. The taxman doesn't hassle you because he took his cut before you got your cheque.
That's funny. In the U.S. it's almost exactly the opposite. First, the lottery says "Jackpot prize $15 million" when it is actually $7 million, because they give you the option of taking the $7 million and putting it a fund which pays out 30 annual payments of half a million each. Then the tax comes on top of that. Counting only the federal income taxes and inflated advertising, that means that a jackpot advertised as $15 million comes out to a lump sum of about $4.6 million.

Re:A dream come true? (2, Insightful)

baldass_newbie (136609) | more than 7 years ago | (#17797592)

The state doesn't help me earn my paycheck, but they tax that. And then I take whatever is left and I invest it, and they tax that. And if I do a lot of that saving, they tax me more.
Life sucks when you make money. Or win something of value.

I'm having difficulty with this (-1, Offtopic)

Anonymous Coward | more than 7 years ago | (#17797644)

If someone commits suicide, they're no longer suffering depression. [bbc.co.uk] Where's the problem? This is so much mindless corporate-bashing, Seroxat is full of win.

Re:A dream come true? (5, Funny)

thefirelane (586885) | more than 7 years ago | (#17797686)

Missed the obvious: "There's no such thing as a free launch"

Re:A dream come true? (1)

Whiney Mac Fanboy (963289) | more than 7 years ago | (#17797710)

*snort*

You sir, have missed your profession. A lucrative career in headline writing awaits you.

Re:A dream come true? (1)

Cimon Avaro (1022609) | more than 7 years ago | (#17797972)

Missed the obvious: "There's no such thing as a free launch"
Also "That depends on what your meaning of the word 'Free' is."

For my part I call something that puts you out of pocket 25 grand being advertised as "Free" misleading advertising. But I also don't think this is USA specific, happens in less enlightened parts of the world all the time.

Re:A dream come true? (2, Interesting)

Kaydet81 (806468) | more than 7 years ago | (#17797848)

Anti-American Drivel. And I suppose the US is the only country where these sort of taxes occur?

About this taxes... (2, Insightful)

Jak Crow (846160) | more than 7 years ago | (#17797532)

The companies offering the prizes should be paying the taxes. 'Nuff said.

Re:About this taxes... (2, Informative)

Patrik_AKA_RedX (624423) | more than 7 years ago | (#17797558)

"Some contest sponsors provide a check to cover taxes, but that income is also taxable."

Last line from the summary.

Re:About this taxes... (1)

jeisner (56981) | more than 7 years ago | (#17797626)

... 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.
Iterate to convergence, folks.

Do tax experts also claim that this doesn't work? The only issue I can see is that to compute the total amount needed, you must know the rest of that person's adjusted gross income for the year (so you can compute their tax rate at each step of iteration).

I believe I've often read about corporations paying the taxes on perks they give to their senior executives. I always just assumed they iterated.

Re:About this taxes... (1)

jeisner (56981) | more than 7 years ago | (#17797904)

... 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.
Iterate to convergence, folks.

Do tax experts also claim that this doesn't work? The only issue I can see is that to compute the total amount needed, you must know the rest of that person's adjusted gross income for the year (so you can compute their tax rate at each step of iteration).

I believe I've often read about corporations paying the taxes on perks they give to their senior executives. I always just assumed they iterated.
Followup: Confirmed in at least one scenario. I did a little poking around with Google. In the case of a life insurance perk, there is something called a Section 162 Double Bonus Plan. Here the company pays not only the premium and employee's tax on that benefit, but also the tax on the tax. Is this process really iterated further? Yes, judging by the $166,667 example in this article [prweb.com] (since 1 + 0.4 + 0.4^2 + 0.4^3 + ... = 1.66667):

What are the alternatives? The so-called 162 Double Bonus Plan is one. The company agrees to make an annual bonus of the after-tax amount necessary to pay the premium on an executive-owned life insurance policy. The company also makes a "double bonus" to cover the taxes the employee must pay on the bonus(es). Because the participant is paying taxes on the bonuses, the regulations otherwise applicable to traditional NQDC (and, in particular, the Act) are irrelevant. However, since the employer is expected to "gross up" the bonus to cover taxes, this concept is expensive and tax-inefficient. Assuming a 40% marginal tax rate, the gross cost to a Company is $166,667 to yield an after-tax bonus to the employee of $100,000.

Re:About this taxes... (1, Insightful)

OCedHrt (1001533) | more than 7 years ago | (#17797560)

"...owe $25,000 in taxes. Unwilling to sink into debt..."

If $25,000 puts a software consultant into debt, it's time he looks for another job. But more likely than not, the story is just exaggerated. The issue is more of whether not the trip is worth $25,000 to Emmett.

Re:About this taxes... (0)

xtracto (837672) | more than 7 years ago | (#17797632)

If $25,000 puts a software consultant into debt, it's time he looks for another job. But more likely than not, the story is just exaggerated. The issue is more of whether not the trip is worth $25,000 to Emmett.

Personally, I think it is more about how fucked up taxes are. I agree on taxing cash prices but taxing these kind of prices is stupid. 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".

Re:About this taxes... (2, Informative)

JaredOfEuropa (526365) | more than 7 years ago | (#17797784)

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".
1) the Netherlands is not a "Nordic" country.
2) there's no way that under the Dutch tax system a higher gross pay results in less net income. There used to be one threshold where that effect occurred: when you had to switch from the state health insurance to private insurance because of a pay rise, but these days it's all one insurance.

With that said.... $25000 would definitely put this software consultant in debt. But for a trip into space I'd still be able to come up with the money.

Re:About this taxes... (2, Informative)

Matje (183300) | more than 7 years ago | (#17797840)

Personally, I think it is more about how fucked up taxes are. I agree on taxing cash prices but taxing these kind of prices is stupid. 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".

Care to point to a specific example?

You do know that the Dutch income tax works with income brackets right? you only pay the higher tariff over the income above a certain threshold. So if the pay rise bumps your income into a higher tariff group, then the higher tariff will only apply to the excess income. Since the highest tariff is 52%, there is no way that you can end up earning less.

A quick example: You earn 49,000 euros. You get a pay rise that bumps your income to 51,000. the 52% tax bracket starts at 50,000, while you pay 42% up to the 50,000 limit. You'll pay 42% over the first 1,000 and then 52% over the next 1,000. So the 2,000 pay rise will cost you 420+520 euros in tax (47% of the pay rise). After taxes you have 1060 euros more to spend.

I think there is a very good reason to tax these kind of prices. Quite simply if you would not tax prize money, then people would set up fake lotteries and awards to cheat the income tax.

Re:About this taxes... (1, Informative)

Anonymous Coward | more than 7 years ago | (#17797910)

I think there is a very good reason to tax these kind of prices. Quite simply if you would not tax prize money, then people would set up fake lotteries and awards to cheat the income tax.
Hmm. To the best of my knowledge, most countries don't tax prizes or betting winnings.

Certainly my country (the UK) does not - and I've never heard of anyone evading tax via fake competitions or lotteries.

There used to be a tax on sports betting winnings - but nowadays the bookmaker pays a tax on his profits.

Pay raises in the Netherlands (4, Informative)

shani (1674) | more than 7 years ago | (#17797842)

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.

Re:About this taxes... (2, Insightful)

TapeCutter (624760) | more than 7 years ago | (#17797846)

"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"."

That's an urban myth for people who employ other people who don't understand tax brackets. You can never lose money by increasing your pay unless the higher bracket is taxed at greater than 100%. I seriously doubt that is the case, anywhere!

Re:About this taxes... (1)

anthony_dipierro (543308) | more than 7 years ago | (#17797906)

You can never lose money by increasing your pay unless the higher bracket is taxed at greater than 100%.

When multiple jurisdictions are taxing you (like federal/state/local in the US), it is possible.

And besides that there are some corner cases. For instance, the retirement savings credit drops from 50% to 30% when you hit an AGI of $30,000. So if your AGI is $29,999 and you contributed $4000 to a Roth IRA you probably pay no taxes, but if your AGI is $30,001 and you contributed $4000 to a Roth IRA you probably do owe taxes, and more than $2 of them at that. Tax brackets generally don't work that way, but credits sometimes do.

Re:About this taxes... (3, Insightful)

drsquare (530038) | more than 7 years ago | (#17798036)

Personally, I think it is more about how fucked up taxes are. I agree on taxing cash prices but taxing these kind of prices is stupid.
It's not stupid at all. Otherwise people could avoid taxes by being paid in cars, food, houses, etc.

Re:About this taxes... (1)

Jak Crow (846160) | more than 7 years ago | (#17797656)

I can't say I know many people with $25,000 in cash reserves to cover the cost of taxes on a trip to space prize. Can you?

Re:About this taxes... (0)

Anonymous Coward | more than 7 years ago | (#17797666)

The issue is more of whether not the trip is worth $25,000 to Emmett.

How is poor Emmet supposed to pay $25000 in taxes when he can't even afford his own washbasin for the jug band?

Re:About this taxes... (3, Insightful)

bytesex (112972) | more than 7 years ago | (#17797736)

You sound like one of those (indicted) CEOs that goes public with messages about 'people making normal living wages, you know, like 100,000.00 or so, per year'. 25K is a lot of money to just have lying around, especially if you have a family.

Re:About this taxes... (1)

OCedHrt (1001533) | more than 7 years ago | (#17797818)

$25,000 is a lot of money, but resulting in debt is quite extreme. At the most, maybe a dent in the retirement plan that could be made up within the year. For a childhood dream, or any dream for that matter, I think it's a small price to pay.
And yet people wonder why opportunities always pass us by.

Plus, he should've known that he would need to pay taxes. They're nothing new.

Re:About this taxes... (0)

Anonymous Coward | more than 7 years ago | (#17797704)

OK:
"this": singular
"taxes": plural
"about this taxes": inconsistant

Re:About this taxes... (5, Funny)

HistoricPrizm (1044808) | more than 7 years ago | (#17797920)

Trip to space: $138,000 Taxes on trip to space: $25,000 Making a spelling error when complaining about someone else's grammar: Priceless

Re:About this taxes... (1)

mangu (126918) | more than 7 years ago | (#17797942)

companies offering the prizes should be paying the taxes.


And how would they work out how much to pay? Income taxes are subject to so many variations that they would also need to pay for an accountant. Then they should add the value of a professional tax consultation to the prize, which would increase the tax owed, etc... I don't think this series will converge [math.ubc.ca]

Still Not a Bad Deal (5, Insightful)

0rionx (915503) | more than 7 years ago | (#17797540)

...all things considered.

I mean, we're talking about a trip into space. Considering the normally prohibitive cost of recreational spaceflight, $25k almost seems like a bargain. I've seen people blow that much on timeshares for goodness sake. If nothing else he could write a book about the experience and recoup some of the expense.

Re:Still Not a Bad Deal (1)

delt0r (999393) | more than 7 years ago | (#17797894)

But if you won the trip, you simply mite not have $25,000. Then what? What about which tax year it lands on? Since he can't take the flight yet.

Re:Still Not a Bad Deal (0)

Anonymous Coward | more than 7 years ago | (#17797922)

Yeah, a year at many private colleges costs a lot more. He should've worked at the financing, maybe could've swung a book deal as you said, with some of the book devoted to the money problems he had to wrestle with.

Maybe he didn't deserve the trip after all.

Discount (5, Interesting)

T-Bone_142 (917711) | more than 7 years ago | (#17797550)

What if instead of giving him a free trip they gave him the chance of take a discounted trip, only charging him $1?

Re:Discount (2, Interesting)

Anonymous Coward | more than 7 years ago | (#17797754)

Not sure about in the US, but here in Australia you are required to charge taxes (the GST) on the value of the item, not on the sale cost of the item. These laws are created to prevent tax avoidance through such schemes as you describe.

Re:Discount (1)

TaoPhoenix (980487) | more than 7 years ago | (#17797772)

Post below is correct for the US.

"Discounted" = "Free plus a dollar", right back where he started.

Re:Discount (3, Interesting)

jamesh (87723) | more than 7 years ago | (#17797896)

I think someone already probably thought of that loophole. Couldn't they hire him in some capacity though? Even if it was just to blog about the experience or something.

Worst case they could hire him for an amount such that it was $25000 after tax, which would then give him enough to pay the tax bill with.

possible loophole (5, Interesting)

SethJohnson (112166) | more than 7 years ago | (#17797568)



If they award him the prize while he's in space, do US tax laws still apply?

Seth

Re:possible loophole (0)

Anonymous Coward | more than 7 years ago | (#17797598)

US citizens are taxed on their "worldwide income". If outer space is outside the realm of "worldwide", perhaps not. :P

Yes. (2, Funny)

n1hilist (997601) | more than 7 years ago | (#17797642)

If you'd been following the recent story regarding China's lil' missile they used to destroy an old weather satellite, and then saw US's reaction and statement about it you'll know that America owns space, and possibly everything. :)

Besides, they are already floating lawyers floating in space, waiting.

Re:possible loophole (4, Funny)

will_die (586523) | more than 7 years ago | (#17797758)

Yes, however if he spend 330 days out in space then he would get the expat tax break.

Re:possible loophole (0)

Anonymous Coward | more than 7 years ago | (#17797902)

Yes. A friend of mine has to fill in a tax return even though she's neverlived in the US, because she's legally a US citizen. You don't have to pay US income tax if you've already paid more local income tax on that money, but if the income taxes are lower than the US, then the US government demands the difference.

Re:possible loophole (0)

Anonymous Coward | more than 7 years ago | (#17798012)

If he does some software consulting while in space, does that make it a business trip?

Come to Australia (0)

Anonymous Coward | more than 7 years ago | (#17797572)

Most winnings are not included as part of your income.
Australian Taxation Office [ato.gov.au]

Fool... (2, Insightful)

D-Cypell (446534) | more than 7 years ago | (#17797574)

I find it unbelievable that a 'software consultant' cannot stomach a $25'000 fee for something he wanted so badly. TFA even says he would have a strong case not to pay until he receives his flight, and could pay in installments.

If the guy is worth his salt, and with the publicity he would get from winning the Oracle competition, I see no reason why a decent consultant could not have that paid off in a year.

Re:Fool... (3, Insightful)

gutnor (872759) | more than 7 years ago | (#17797654)

"I find it unbelievable that a 'software consultant' cannot stomach a $25'000 fee for something he wanted so badly"

Maybe there was a lot of thing that he wanted so badly: like $200,000 sport car, $1,000,000 house, ... Regarless of how much you earn, you goes into debt when your lifestyle cost you more that what you make.

Also the guy is 31. That means he started to work in the last years of the internet bubble yet, so there is also strong possibilty he had trouble adjusting. I have a colleague here at work that went from a 700GBP/day contract to nothing for a year followed by 300 GBP/day. This worked ok for him but at the same time, there are tons of stories of consultant buying 1,000,000 GBP houses that had a difficult reality check in 2001.

Re:Fool... (2, Insightful)

Chanc_Gorkon (94133) | more than 7 years ago | (#17797764)

25000 is alot of money for anyone but the rich. 25,000 is a car! When was the last time you bought a car with cash??

Re:Fool... (0)

Anonymous Coward | more than 7 years ago | (#17797918)

In my case, December 11th 2006. And no, I'm not rich (though I am a programmer and therefore make good money) - I'm just prudent with my money and work hard to save.

I just laugh whenever I see these articles on saving. They say things like "Make sure you max out your 401k and IRAs". And I'm thinking... "Duh!!! That is the very least you should be saving"

Re:Fool... (1)

anthony_dipierro (543308) | more than 7 years ago | (#17797930)

25,000 is a car! When was the last time you bought a car with cash??

Back when I worked as a software engineer, actually :).

Re:Fool... (1)

The Dobber (576407) | more than 7 years ago | (#17797944)

Oddly enough, just about 4 years ago. Toyota Tacoma TRD. Cash on the barrel.

Previous truck had just rolled 10 years, might have had something to do with the ability.

Oracle should have made him an employee... (4, Funny)

adnonsense (826530) | more than 7 years ago | (#17797576)

...then they could say they were sending him on a business trip and file it under expenses. ("Reason for trip: To boldly go where no DBA has gone before, to seek out new tablespaces and discover new, alien forms of indices").

(Disclaimer: I'm not an accountant or a tax geek so I don't know whether that would really work out).

I bet Larry Ellinson is laughing hard (5, Funny)

Anonymous Coward | more than 7 years ago | (#17797578)

So am I. Is the consolation prize a sheet of acid tabs and a DVD of 2001? It always works for me.

Don't pay taxes (1)

jlebrech (810586) | more than 7 years ago | (#17797584)

Duh, touchdown on another continent or something.

Does that tax also apply... (1)

Advocadus Diaboli (323784) | more than 7 years ago | (#17797590)

...when you get kidnapped by Aliens?

Re:Does that tax also apply... (1)

Zaatxe (939368) | more than 7 years ago | (#17797860)

Yes, if you are american and win the privilege of being kidnapped in a lottery.

Unwilling to sink into debt (2, Interesting)

farker haiku (883529) | more than 7 years ago | (#17797608)

Yeah, I'm sure he had a problem affording it... but I'd have gone even though that's a substantial portion of my yearly salary. The only thing I can think of is that he might have been in the middle of a divorce - and if his salary was reported to be 138k higher per year, then his soon to be ex might have a much higher alimony. One that he couldn't afford to pay.

Convergence (5, Funny)

Dachannien (617929) | more than 7 years ago | (#17797618)

Some contest sponsors provide a check to cover taxes, but that income is also taxable.

Fortunately, this series eventually converges to values small enough to lose it amid the rounding error on your taxes.

Re:Convergence (1)

abigsmurf (919188) | more than 7 years ago | (#17797934)

Greek philosophers have proven that Americans actually pay infinate tax on prizes. You get money, you get a tax bill for that money, you get sent more money to cover the taxes, get a tax bill for that, get sent more money to cover the tax....

Solution (1)

teslar (706653) | more than 7 years ago | (#17797646)

  1. Get a mailbox somewhere in Europe. Say, at a friends place. I can't think of a country where lottery winnings are taxable over here.
  2. Use that address to enter contests.
  3. Pray nobody finds out you don't actually live there :)

Re:Solution (-1, Troll)

arivanov (12034) | more than 7 years ago | (#17797674)

And enjoy finding out that the contests are open only residents of the USA. That is besides the fact that US thinks that it laws apply anywhere on the planet (and beyond it).

Re:Solution (1)

1u3hr (530656) | more than 7 years ago | (#17797838)

Pray nobody finds out you don't actually live there :)

Right. Because there won't be any publicity, will there?

Ask Richard Hatch [thesmokinggun.com] how that works.

Astronauts? (1)

countach (534280) | more than 7 years ago | (#17797652)

So are they going to start charging astronauts $25000 too?

Re:Astronauts? (1)

c6gunner (950153) | more than 7 years ago | (#17797924)

Yep, right after they start charging 747 pilots $800, and bus drivers $2.25.

Re:Astronauts? (0)

Anonymous Coward | more than 7 years ago | (#17797950)

They should just have a contest to become an employee of a space company. Official job title of "ballast".

What a wonderful demonstration of.... (1, Informative)

Ogemaniac (841129) | more than 7 years ago | (#17797662)

the negative effect of taxes on the economy. While this example is extremely exaggerated, the same thing happens countless times on a much smaller scale every day - I don't buy that shirt, for example, because taxes make the price $22 instead of $20. An otherwise mutually-beneficial transaction is lost.

Studies indicate that about fifteen cents are lost this way for every dollar the government collects for the major taxes (income, sales, property). That implies that the we have to spend a $1.15 just to get the government a dollar - and hence we always overpay for government services.

Re:What a wonderful demonstration of.... (2, Insightful)

Angstroem (692547) | more than 7 years ago | (#17797702)

Boy, would I love to have just 10% sales tax. In Germany, they just cranked it up to 19% this January.

Re:What a wonderful demonstration of.... (2, Insightful)

Fred_A (10934) | more than 7 years ago | (#17797798)

At least in Germany (or in the rest of the world for that matter), the sales tax is part of the price of the item.
When you travel in the US you never know how much it is until you pay. And if you ask beforehand how much the local tax is, they give you nasty looks like you were insulting their dear mothers.
It's a completely braindead system.

Re:What a wonderful demonstration of.... (1)

Angstroem (692547) | more than 7 years ago | (#17797858)

Not sure whether it is brain-dead. In a world of gross-pricing you also never know how much of tax is on it -- too few people have a look at the end price to see how much tax is included. That makes it easier for politicians to raise taxes because the constant "darn, it said it costs $X, but I had to pay $X*1.2 in the end!" feeling is missing.

Besides, in the US you have this wonderful law so that you have to pay no sales tax on trans-state sales (at least true for mail/internet orders), so apart from your daily groceries there is hardly any need for paying big bucks on electronics etc.

I wish we had the same in the EU.

Re:What a wonderful demonstration of.... (1)

c6gunner (950153) | more than 7 years ago | (#17797980)

Not "the rest of the world". Sales tax in Canada is never included in the price. I'm sure there are other countries where it's the same. Granted, it was inconvenient until I learned some basic math, but the other poster hit it exactly - when taxes are part of the advertised price, it becomes much easier to raise taxes.

Re:What a wonderful demonstration of.... (0)

Anonymous Coward | more than 7 years ago | (#17797750)

Yeah, but the alternative is worse. Your worryingly powerful "Christian" right wants to slash taxes and limit federal power as a means of largely relegating the governments' role to military matters, while they take over everything else. Read this [thirdworldtraveler.com] and bear it in mind next time you see them spouting their coded bullshit.

Re:What a wonderful demonstration of.... (1)

bjourne (1034822) | more than 7 years ago | (#17797982)

There is taxes on every value transaction. When you work, your employer pays you a set amount of money and a percentage of that goes to the government (the community, that is). No mutually-beneficial transaction is lost because you claim a yearly salary of 35k so that you can pay 15k in taxes instead of a salary of 20k if there would have been no taxes. Part of the transaction is just re-routed through the state so that those to poor to make mutually-beneficial transactions themselves still can live a decent life.

There is absolutely nothing inherently unfair with paying income tax. If there was no tax there would be no state and there would be anarchy. Would you rather prefer that?

No way. (5, Insightful)

GregoryD (646395) | more than 7 years ago | (#17797690)

I call BS. I don't think he wanted to go in the first place. Nobody with a dream of space flight would pass this up. I'm a freaking grocery/dept store clerk and I could put 31k on a credit card. Sure that is really dumb thing to do, but man, this is for space. While working my butt off for the next billion years to pay it off, I could have one heck of a story to tell.

American's don't have to pay taxes? (2, Informative)

grant050 (806347) | more than 7 years ago | (#17797694)

FTA: ...report the $138,000 galactic joy ride as income...
I heard American's don't have to pay income taxes, in this documentary, America - Freedom to Fascism.
It's got an interview with a lady who was on a jury and neither the prosecutor or judge could state the law that says a person has to pay income tax. So the jury found 'not guilty'. America - Freedom to Fascism [thepiratebay.org]
Disclosure: I'm Australian, I don't pay American taxes anyway.

Re:American's don't have to pay taxes? (1)

publius1234 (615205) | more than 7 years ago | (#17797804)

There are folks out there who believe that the income tax is unconstitutional and have used the strategy you described with varying degrees of success. Needless to say, the IRS doesn't agree with this point of view, and they can absolutely ruin your life on a whim if they see fit. With this in mind, most people just pay their taxes.

Re:American's don't have to pay taxes? (1)

will_die (586523) | more than 7 years ago | (#17797830)

Anytime you see America or Australia compared to fascism you should take the author as a joke.
Unfortunarly you have to pay income taxes in the US, we even have pay taxes if we earn the money in other countries.
You only need to look at all theses [irs.gov] people to see that the US government will force you to pay taxes.

Re:American's don't have to pay taxes? (0, Troll)

Nitage (1010087) | more than 7 years ago | (#17798008)

In the US, taxes are unconstitutional for any reasonable interpretation of the constitution. Why then have taxes been ruled consitutional? Judical Activism [wikipedia.org]

You've just discredited that documentary (0)

Anonymous Coward | more than 7 years ago | (#17797966)

I heard American's don't have to pay income taxes, in this documentary, America - Freedom to Fascism.

I've also heard that the moon is made out of green cheese... doesn't mean its true. Yeah people have contested income taxes and have gotten juries to make decisions like the one you quote, but I can assure you - Americans pay their income taxes and even if our IRS (Internal Revenue Service) occasionally gets setbacks they still have the capability to thoroughly shake you down if you are not properly paying your taxes.

Argh! (1)

OpenSourced (323149) | more than 7 years ago | (#17797706)

Some contest sponsors provide a check to cover taxes, but that income is also taxable.

It's a kind of infinite recursive descent to RUIN!

Selling it would have been more ideal. (1)

JoneK (833819) | more than 7 years ago | (#17797708)

He could have sold it. Even if he sold it with 30k$ he would have gained 5000 profit and after tax. He would have gotten money from it. To him self...

Income? (4, Insightful)

ObsessiveMathsFreak (773371) | more than 7 years ago | (#17797730)

I fail to see how a free trip to space equates to income. Yes, the trip ordinarily costs $138,000, but this paticular trip was priced at "Win this competition". That doesn't have any monetary value. X% of "Win this competition" is not equal to $25,000. As others have mentioned, the company could also have priced that paticular seat at $1 and been well withing their rights. This story seems bogus.

This kind of reminds me of property taxes, where someone walks up to your house, says "I reckons she's worth about this much, so you pay me that much", despite the fact that your house is earning you no income and will be taxed anyway when sold or inherited. It doesn't make much sense.

I'm a believer in financing the state through taxes. But I'm also of the opinion that there should be some kind of logic to tax. Charging people money for something when they haven't actually made any money, or indeed materially benefited in any way, as in this case is like something out of a one dimensional folk tale. When tax is levied, there should always be a question, why is it being levied?

We need taxes. But we also need to remember that the government is not our landlord. It is wrong to have a tax on simply being alive. Tax should be avoidable, if you have no money to pay any.

Re:Asshole? (0)

Anonymous Coward | more than 7 years ago | (#17797888)

You forget that IRS is asshole.
What 'should' be doesn't matter to them, only how to get money from you, your life, freedom, any logic or law be damned. Of course if law is on your side, you can fight and win, but that won't stop them from trying.

Example: they can fine you unlawfully, and God forbid you don't pay! You'll end up in prison, no matter if they were right or not - you MUST pay if they demand, and only then you can sue them. And with some luck, five years later, after spending most of your funds on lawyers and getting your firm bankrupt because you gave your money to IRS instead of paying debts, bills and salaries, you get awarded the exact amount they took from you. No compensation, no interest, no lawsuit costs, just the money they weren't entitled to. And they won't care they drove you to bankruptcy.

The system is sick, but there's nothing we can do about it.

Re:Income? (1)

91degrees (207121) | more than 7 years ago | (#17797946)

This kind of reminds me of property taxes, where someone walks up to your house, says "I reckons she's worth about this much, so you pay me that much", despite the fact that your house is earning you no income and will be taxed anyway when sold or inherited.

But there is a lot of law related directly to property, and fairly established mechanisms for dertermoning the value of a house. A spaceflight is different. Or at least it should be. Like anything else of this type, e.g. airlines, I have a cost, and a maximum number of people I can spread this cost between. I can divide the cost by the number of people, or I can charge the maximum I think the market will bear for each seat. If I have covered my costs without filling all the seats, then anything I charge for those other seats is pure profit. Once the market for expensive seats has been eliminated, that seat is worth the maximum anyone ;eft over will pay for it. This could be as little as $1.

Re:Income? (0)

Anonymous Coward | more than 7 years ago | (#17798000)

I personally dislike property taxes as well however they have a side purpose other than just generating income for the government. They are suppose to serve as motivation for the owners of said properties to improve, develop, and maintain their property. Without the taxes the owners can just sit on their property and let it deteriorate despite the negative effects it is having on the surrounding area. Hurts the house rich, cash poor people but then these are the very people whom are least likely to be keeping up with the gentrification going on around them.

Re:Income? (1)

1u3hr (530656) | more than 7 years ago | (#17798002)

I'm a believer in financing the state through taxes. But I'm also of the opinion that there should be some kind of logic to tax. Charging people money for something when they haven't actually made any money, or indeed materially benefited in any way, as in this case is like something out of a one dimensional folk tale. When tax is levied, there should always be a question, why is it being levied?

The trip is valued at $138,000. Whether he can resell it or not is not the IRD's problem. It's not a profit tax, or an assets tax, it's an income tax.

Re:Income? (1)

mapkinase (958129) | more than 7 years ago | (#17798026)

or indeed materially benefited in any way
You gotta be kidding. How is the adventure of the life time is not a material benefit?

Taxes have always had this effect (1)

die_another_day (1057050) | more than 7 years ago | (#17797740)

There have been all sorts of endeavors that were canceled once the tax implications were considered. All businesses have to weigh the tax implications of every decision made.

Donations or Ebay (0)

Anonymous Coward | more than 7 years ago | (#17797778)

He could set up an paypal account and ask for donations.

or

He could sell that trip on Ebay.

Ah, I love Canada (2, Informative)

xiang shui (762964) | more than 7 years ago | (#17797790)

...he wouldn't have had to pay a dime, Up North. Gifts or prizes are _not_ taxable.

The Guy's Own Blog Entry (3, Informative)

Anonymous Coward | more than 7 years ago | (#17797834)

http://www.eminentbrain.com/ [eminentbrain.com]

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.

He gave up too soon!!! (1, Insightful)

erroneus (253617) | more than 7 years ago | (#17797884)

He might have started some sort of charity thing and solicited donations and collected via eBay. He would have had a whole year + extensions after the trip or something along those lines to make it all happen. You think there aren't 25,000 sympathetic geeks all over the world who wouldn't have given a dollar to let this guy go into space? I would have. I'd kick in more.

orthagonal thinking reqd. (1)

dotmax (642602) | more than 7 years ago | (#17797898)

bummer to give up the trip, but i can see how $25k might be a porblem [sic]. In a circumstance like this i'd try to tap into the pop. culture for resources. Whore myself out for endorsements, appearances, start a "training for my flight" blog or something. Being a lucky space prize winner has _got_ (one would hope) to carry enough cachet that a clever chappie could leverage it to earn the money required.

For one thing (1)

Dunbal (464142) | more than 7 years ago | (#17797936)

I think he's getting off lucky. The IRS might suddenly decide that the company is underestimating the value of the trip, and place its value at $20M US, which up to now has been the going rate. There - pay taxes on THAT! ;)

Sponsors (2, Funny)

Joebert (946227) | more than 7 years ago | (#17797968)

I'm sure the Porn industry would pay 25K for the only video in existance of someone whackin in space.

There is no free launch (1, Funny)

OricAtmos48K (979353) | more than 7 years ago | (#17797984)

There is no free launch

Not uncle Sam (1)

mapkinase (958129) | more than 7 years ago | (#17798018)

Oracle. They should have paid the taxes as well. It was very obvious from the beginning that Uncle Sam would lay his long bony arms on this.

BTW, it is not too late for Oracle to do it now.

Oracle should've coughed up the taxes too (1)

Mr. Droopy Drawers (215436) | more than 7 years ago | (#17798020)

I'm surprised Oracle didn't solve this. They could have paided the "in kind" taxes so that there would no burden on this guy. My employer did this for my relocation and sign on bonus.

Tax law doesn't apply in space (0)

Anonymous Coward | more than 7 years ago | (#17798024)

The ``taxable'' event occurs when the trip is received, but space is outside the country, in fact, space is outside the planet. Due to that fact, nothing taxable occurs within the boundary of the US, nothing taxable occurs while he is still on the planet.

So he's clearly in space, where US law does not apply, no country's law applies.

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