Space Tax
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
A prize isn’t a prize if you have to pay for it, but try telling that to the Internal Revenue Service. It taxes prizes as income, which means that even non-cash winnings come with a hefty government price tag. A software engineer named Brian Emmett learned all this the hard way recently after he won a $138,000 trip to space in an Oracle Corporation sweepstakes.
Poor Mr. Emmett thought he was finally going to be able to live out his childhood fantasy of blasting into orbit. Then the IRS yanked him back to earth, when he learned he would have to pay the government $25,000 for the privilege of accepting the prize. Since Mr. Emmett is not a wealthy man, he will have to take a pass on the trip. “Everything you had hoped for as a kid sort of evaporates in front of you,” Mr. Emmett told the Associated Press.
We doubt that evaporating peoples’ hopes through government tax grabs is what the Founding Fathers had in mind when they established the Congress of the United States. More likely it was the opposite. Revolutionaries, after all, had angrily tossed boxes of British tea into Boston Harbor to protest the taxes the Crown had levied on its colonial subjects. Today, however, Americans are taxed on everything from property to income to sales to profits to capital gains to luxury to excise on tobacco. We are even taxed when we die.
The IRS certainly isn’t shy about it either. It once sent a bill to the family of a victim of the terrorist bombing of Pan Am Flight 103 for $6.5 million — before they had received any wrongful death compensation from Pan Am. Then in 1998, the IRS famously threatened to tax the fan who caught Mark McGwire’s record-breaking 62nd homerun. It later backed down, but the groundsworker who picked up the ball wasn’t taking any chances and gave it back to Mr. McGwire. “He can do whatever he wants to do with it,” the man told the New York Daily News. “I just don’t want to get taxed.”
In so doing the groundsman proved that he was a rational economic person — and demonstrated a lesson that needs to be taught over and over again. Taxation affects behavior. Mr. Emmett joins a long line of Americans who have made a rational decision not to pursue their dreams rather than pay the tax. It’s a nice little parable to remember as the 110th Congress, controlled by the Democrats, starts to wield its taxing powers.
