A windfall gain (or windfall profit) is any type of income that is unexpected.[1]
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Types of Windfall Gains
The list of windfall gains includes, but is not limited to:
- Lottery winnings
- Unexpected inheritance
- Gains from demutualization
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 Hypothesis.[2]
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 tax.[3]
Taxes
Barack Obama has proposed a windfall profits tax 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.[4] [5].
References
- ^ "Wealth Effect". RevisionNotes. January 1, 2003. http://www.revision-notes.co.uk/revision/404.html. Retrieved 2007-03-09.
- ^ "Windfall Gains". The Economist. January 1, 2007. http://www.economist.com/research/Economics/alphabetic.cfm?term=windfallgains#windfallgains. Retrieved 2007-03-09.
- ^ "Windfall Profit". The Economist. January 1, 2007. http://www.economist.com/research/Economics/alphabetic.cfm?term=windfallprofit#windfallgains. Retrieved 2007-03-09.
- ^ http://www.barackobama.com/pdf/factsheet_energy_speech_080308.pdf
- ^ http://democrats.senate.gov/dpc/dpc-new.cfm?doc_name=lb-110-2-78
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