Why if I hit the lottery do I pay more taxes than wealthy person with old money?

It's called capital gains tax. If you were to earn the same amount of money you would still have to pay taxes on it.

The money in the bank has already been taxed. When income is earned it is taxed once. You can;t keep taxing money sitting in a bank that has already been taxed. You aren't being hit because you are poor, you are being hit because of your income. And you will only pay that tax once. If you put it in the bank you will only continue to be taxed on the interest that was earned, not the lottery winnings you still have.

If wealth were taxed then theoretically all money would eventually be taken by the government. Think about it, if you win 100K in the lottery, and have to pay a 20% tax on that every year, after 50 years or so the money will be taxed away to nothing because you kept it in the bank instead of blowing it all within the first couple of years. Taxing wealth would encourage people to splurge instead of saving.

Actually, in many states, you get off easier since some states do not tax the lottery winings. You still pay the fed tax though.

In terms of the actual value of the tax, the amount is based on NET income, and since you likely do not have the same deductions, you end up paying a larger amount.

The best way to deal with it is to get some advice from a tax pro BEFORE you make the formal claim of any winnings (most states give you a full year to come forward). That gives you time to plan on how to get the most from your winnings.

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If you take 1/2 up front the Fed tax is 40% then State and and City Income taxes if you have one.

On 200 Million the State gets 100 million by you doing that plus they tax you for the other half. Then why are they broke and say the Lottery goes to shcools. I think it goes more into the pockets of the mob thats running it.

When you receive money you have to pay taxes on it as income. Somebody who already has money in the bank has theoretically already paid the taxes on that income. Historically the tax rate on higher incomes has been MUCH higher in the past than it is now, so you're actually paying less taxes than the old man, all things considered.

If you keep all your money in a giant vault like Scrooge McDuck then you don't have to pay taxes on that. However, if you keep your money in the bank where it earns interest, or you keep it in the stock market where it grows, you have to pay capital gains taxes on the money you earn from your wealth.

A wealthy person with old money already has the money. We don't tax what people already have -- only what their income is.

Income includes what you earn from a job, what you win in the lottery, what you inherit (with some limitations), etc.

In theory, someone already paid taxes on the income that the wealthy person has.

If a wealthy person has the same income you do, you pay the same in taxes. You aren't taxed on the money you have, you are taxed on the money you make.

It's like a gift so in long run, amount you will pay is by the amount you gained. They will tax you on it all. I know there is a tax difference. Weather by working income, gift tax, inherit tax. You need to call the tax office and ask.

Winning the lottery is different than investing wisely. The old money you're talking about don't have billions of dollars just sitting under their mattress. It's invested and has probably been that way for a while (can't tax wealth).

If you have $10 million total, but for the year you only made $20,000, you get taxed on the $20,000 you made that year, not the $10 million you already have.

If you make $20,000 a year, and you win $10 million in the lottery, you will pay taxes on $10,020,000 for that year. That is money that you made that year.

It's not your total wealth you get taxed on. You get taxed on your income for that year.

Everyone is subject to the same tax laws and the rates differ based upon your taxable income. Lottery winnings are no different from other winnings.