Windfall gain
Encyclopedia
Types of Windfall Gains
The list of windfall gains includes, but is not limited to:- LotteryLotteryA lottery is a form of gambling which involves the drawing of lots for a prize.Lottery is outlawed by some governments, while others endorse it to the extent of organizing a national or state lottery. It is common to find some degree of regulation of lottery by governments...
winnings - Unexpected inheritanceInheritanceInheritance is the practice of passing on property, titles, debts, rights and obligations upon the death of an individual. It has long played an important role in human societies...
- Gains from demutualizationDemutualizationDemutualization is the process by which a customer-owned mutual organization or co-operative changes legal form to a joint stock company. It is sometimes called stocking or privatization. As part of the demutualization process, members of a mutual usually receive a "windfall" payout, in the form...
Uses of Windfall Gains
What people do with windfall gains is subject to much debate. While they differ from one account to the next, most economists hypothesize that the majority of the gains are saved, due to the Permanent Income HypothesisPermanent income hypothesis
The permanent income hypothesis is a theory of consumption that was developed by the American economist Milton Friedman. In its simplest form, the hypothesis states that the choices made by consumers regarding their consumption patterns are determined not by current income but by their longer-term...
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Windfall Profits
Windfall profits are a type of windfall gain. They can occur due to unforeseen circumstances in a product's market, such as unexpected demand or government regulation. Since the profits were unforeseen, some legislators believe that taxing them at a higher rate, or confiscating them outright, should not hurt the company. This type of taxation is known as a windfall profits taxWindfall profits tax
A windfall profits tax is a higher tax rate on profits that ensue from a sudden windfall gain to a particular company or industry.-United Kingdom:In the United Kingdom, the Windfall Tax was a tax levied on privatised utility companies.-United States:...
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Taxes
Barack ObamaBarack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
has proposed a windfall profits tax
Windfall profits tax
A windfall profits tax is a higher tax rate on profits that ensue from a sudden windfall gain to a particular company or industry.-United Kingdom:In the United Kingdom, the Windfall Tax was a tax levied on privatised utility companies.-United States:...
on oil company profits in his New Energy for America plan. However, Obama shelved this plan in Dec 2008 when oil prices dropped below $50 a barrel.