Windfall gain

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A windfall gain is any type of income that is unexpected.[1]

Contents

[edit] Types of Windfall Gains

The list of windfall gains includes, but is not limited to:

  • Lottery winnings
  • Unexpected inheritance
  • Gains from demutualization
  • Windfall profits

[edit] 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]

[edit] 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. Since the profits were unforeseen, some legislators believe that taxing them should not hurt the company. This type of taxation is known as a windfall profits tax.[3]

[edit] References

  1. ^ Wealth Effect. RevisionNotes (January 1, 2003). Retrieved on 2007-03-09.
  2. ^ Windfall Gains. The Economist (January 1, 2007). Retrieved on 2007-03-09.
  3. ^ Windfall Profit. The Economist (January 1, 2007). Retrieved on 2007-03-09.
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