Windfall gain
A windfall gain is an unusually high or abundant income, net profit or profit margin, that is sudden, unexpected, or, at times, anticipated.[1]
Types
[edit | edit source]Examples of windfall gains include, but are not limited to:
- Unexpected inheritance or other large monetary gift from another
- Sweepstakes winnings
- Winning a lottery or success in another form of gambling
- Returns on investments
- Proceeds or profit from a large sale
- Game show, or other contest winnings
- Employment payroll bonus
- Natural resources
- Foreign aid
- Proceeds from an insurance claim
- Settlement from a lawsuit
- Discoveries from treasure hunting
Uses
[edit | edit source]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.[1]
Windfall profits
[edit | edit source]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.[2]
Taxation
[edit | edit source]Since windfall 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]
See also
[edit | edit source]- Demutualization – Form of privatization
References
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