If billionaires are bad, why create more of them? Seems like lotteries should top out at something like $1 million. They could have a lot more winners for the same price.
If billionaires are bad, why create more of them? Seems like lotteries should top out at something like $1 million. They could have a lot more winners for the same price.
I remember reading about the powerball many years ago. They reduced the change you would win, and therefore increased the potential payout. It significantly increased the amount of people who...
I remember reading about the powerball many years ago. They reduced the change you would win, and therefore increased the potential payout. It significantly increased the amount of people who would play, so increased tax income.
You're right, but is someone who legitimately blows all their money on the lottery likely to use that money on their own needs? My first impression says no, but I could be completely wrong. For...
You're right, but is someone who legitimately blows all their money on the lottery likely to use that money on their own needs? My first impression says no, but I could be completely wrong.
For everyone else, I would expect that the same, say, $5 would otherwise be spent on something that just puts money into a corporation. At least with the lottery, a higher percentage goes to funding schools or whatever.
Not necessarily a fan of the lottery; just thinking pragmatically.
There are many lotteries in California. The Mega Millions is just the biggest of them all. It exists specifically to be a huge number; that is its selling point. Like most lottery tickets, you buy...
There are many lotteries in California. The Mega Millions is just the biggest of them all. It exists specifically to be a huge number; that is its selling point. Like most lottery tickets, you buy them for the fantasy of winning because the chances of you actually winning is astronomical. If you want something you are more likely to win you could play something like the Daily 3, the last of which had a winner of just over $500 at the time of writing. They also have scratcher tickets which have built-in odds and profit margins - they know they are going to make $x in revenue and spend $y in prizes from the get-go because they print everything ahead of time.
The prize for Mega Millions also scale with the number of tickets purchased since last payout, so this big number means that people keep betting and losing and it has allowed the pot to draw this large. It also means the state has collected a lot of money which will not be going to the winner and will be spent on social programs. They also will not instantly be given that figure. They will be given the option of a lower lump sum or an annuity for the full amount. If they choose the annuity the state can use the money while they have it to invest and make more money from it - they have the time value of money.
On the macro scale the lottery almost certainly does more good than harm. The same is not necessarily true in an individual level.
Does it? Seems like that would be extremely hard to measure. Lotteries are pretty much universally a tax on the poor, so even before you get to the point of spending the money, your funding source...
On the macro scale the lottery almost certainly does more good than harm. The same is not necessarily true in an individual level.
Does it? Seems like that would be extremely hard to measure. Lotteries are pretty much universally a tax on the poor, so even before you get to the point of spending the money, your funding source is hugely regressive. Even if you're wisely spending all of the state's earnings on education (you're not, running a lottery is a pretty big expense in it of itself), it's almost exclusively poor people funding it with money that otherwise could have gone towards improving their own lives, because the carrot you're dangling in front of their faces that they have a chance, however remote, of escaping poverty is just that tempting.
You could make the argument that having a remote chance of hope in their minds that they'll win the lotto improves their mental health somehow, but I'm not nearly qualified enough to say if that's the case, and it may also be the case that giving people false hope makes things worse in that regard as well.
Lottos in generals have a few pros, but a lot of cons, and it's both very difficult to evaluate all of those against each other, and would be politically unpopular to do so. Politicians get to patch an absolutely massive hole in their state deficits while not increasing taxes, poor people get a distracting and potentially addictive money-sink, and we don't really discuss how much it hurts them in the long run.
The fact that a horrifying number of lottery winners wind up dead or destitute a few years after winning doesn't really tip the scales in the lottery's favor either.
It is regressive. But it is also completely voluntary. If the people who buy lottery tickets were unable to do so, what is the likeliness that they would spend that money on investments instead of...
It is regressive. But it is also completely voluntary. If the people who buy lottery tickets were unable to do so, what is the likeliness that they would spend that money on investments instead of other forms of gambling?
Honestly I think that this kind of thinking is really condescending. Do you think the people buying these don’t know what a waste of money they are? The odds are listed. It’s true that most people don’t have a good understanding of statistics but they aren’t morons. It makes them happy. Why does their happiness need your approval? And with a state run lottery it means the money they spend isn’t just lining some greedy despot’s pockets.
And if they really are so bad at managing their money as you make them sound then so what if they end up losing that money? Wouldn’t that be a result of them being bad at money in the first place - which is how they got the money to begin with? Saying winning the lottery caused someone to die is a really big logical stretch.
If the lottery is really that bad, then why isn’t there more popular support to end it? There are people who are anti-lottery in the state of course. It would be weird if there weren’t. But I can tell you that in spite of all the people who I know think it’s dumb to buy lottery tickets, absolutely zero of them are for abolishing the lottery altogether. I asked my husband and he said the same thing. I would be first to agree with you that the lottery is an imperfect thing and that you shouldn’t buy into it. But it’s far from the devil you make it to be.
Yes, it’s certainly true that hardly anyone is against lotteries. Isn’t that odd, though, given how inequality is such a big issue these days? I wouldn’t expect a majority to be against lotteries,...
Yes, it’s certainly true that hardly anyone is against lotteries. Isn’t that odd, though, given how inequality is such a big issue these days? I wouldn’t expect a majority to be against lotteries, but I’d expect the sort of people who want wealth taxes to be against adding more people to the 1% in this way.
Personally, I’m ambivalent, because used in moderation, it can be seen as entertainment.
I mean, if you're for wealth taxes, you'd love lotteries. They are heavily taxed. The lottery tickets are taxed. The winnings are taxed (at the maximum income bracket, almost certainly). That's...
I mean, if you're for wealth taxes, you'd love lotteries. They are heavily taxed. The lottery tickets are taxed. The winnings are taxed (at the maximum income bracket, almost certainly). That's why many lotteries are state run to begin with.
Whether the money goes to pay for the ticket or to pay the tax, it’s essentially a “tax” on poor people. (If you can consider a voluntary purchase a tax.) When someone wins, the state gives out...
Whether the money goes to pay for the ticket or to pay the tax, it’s essentially a “tax” on poor people. (If you can consider a voluntary purchase a tax.)
When someone wins, the state gives out the money and taxes some of it back. (I’m ignoring the difference between state and federal taxes.) So this seems more like a way of inflating the headline number for the winnings.
In the end, it’s still creating multimillionaires, if not billionaires, so inequality goes up.
Think of it as perhaps a 50% sales tax on that $5 instead of the 10% the state would get at Walmart. That's extra money for government programs. It creates one extra rich person (at least...
Think of it as perhaps a 50% sales tax on that $5 instead of the 10% the state would get at Walmart. That's extra money for government programs. It creates one extra rich person (at least temporarily) while subsidizing a bunch of government programs, theoretically reducing inequality.
I'd probably count myself among the remaining few, at least to a degree. I'm not against the concept of a lottery itself, but I very much dislike the fact that advertising lotteries is allowed as...
it’s certainly true that hardly anyone is against lotteries
I'd probably count myself among the remaining few, at least to a degree. I'm not against the concept of a lottery itself, but I very much dislike the fact that advertising lotteries is allowed as I see it as a predatory practice given the known risks of addiction regarding gambling and that the advertising industry is so pervasive that fully opting out of it is impossible. To be fair I already hold a very dim view of advertising as a whole, but I see ads for lotteries and gambling as more harmful than most other products, similarly to ads for drugs (for which advertising is banned in my country). Ultimately I would side against banning lottery (and gambling in general), but that's because I believe pushing it into the black market would result in it becoming even more harmful than in its current regulated state, not because I approve of it (also I suspect it would be extremely hard to properly define "lottery" without either more innocent activities being lumped in or leaving obvious loopholes).
I haven't researched this at all, but I think that buying lottery tickets is a relatively benign vice. I seems like a relatively non-addictive form of gambling. I guess it is a tax on the poor...
I haven't researched this at all, but I think that buying lottery tickets is a relatively benign vice. I seems like a relatively non-addictive form of gambling. I guess it is a tax on the poor like you say, but would that money they spend on lottery be earmarked for nutritious food or going to a wise investment, or would it be used for some other worse form of gambling?
I agree that we mostly hear negative stories about how winning a lottery rarely improves a life. I did a little web search on this, and it seems like the problems are exaggerated a bit and the benefits are minimized a bit. But I'm going off a few opinion pieces and not hard data.
If it helps, it's highly unlikely that this will create a new billionaire. More likely, the world gets a new hundred-millionaire with a lot of personal problems they didn't have before.
If it helps, it's highly unlikely that this will create a new billionaire. More likely, the world gets a new hundred-millionaire with a lot of personal problems they didn't have before.
Absolute statements tend to ignore the infinite shades of gray between two points. Tis why only a Sith speaks in absolutes. Not that I'm saying billionaires should exist... ABAB (All Billionaires...
Absolute statements tend to ignore the infinite shades of gray between two points. Tis why only a Sith speaks in absolutes. Not that I'm saying billionaires should exist...
ABAB (All Billionaires Are Bastards) is directed toward the cough cough "self-made" billionaires and the multitude of people they had to exploit to get there.
The winner here also isn't getting a billion dollars; if they take the annuity they'll get $768.6M over 30 years (and that number assumes current tax rates remain steady for the entire time), if they take the lump sum it'll be a single payment of $353,986,416.
Not that I'm saying multi-hundred-millionaires should exist either.
People have responded about the moral side of your question. I'll just point out the monetary side (not that I'm advocating for lotteries). This lottery isn't really for $1.22B. It's for about...
People have responded about the moral side of your question. I'll just point out the monetary side (not that I'm advocating for lotteries).
This lottery isn't really for $1.22B. It's for about half that much as a lump-sum payout (according to the terms of PowerBall and Mega Millions). Then the state the winner resides in and the federal government get a large chunk of those winnings. In a state like Oregon, which a quick search suggests has the highest lottery tax rate, you'd be paying 9% of the total. Then the federal government gets up to 37%.
So states where winning tickets are sold benefit more, perhaps, from higher lottery jackpots. There'd need to be some statistical analysis to see if winning more money less often is better than having more, smaller jackpots won. But the federal government is the bigger winner. And generally big jackpots will put most people in the top tax bracket. I believe that money is taken out of the payout immediately, so the winner never even sees that money (which is why governments aren't concerned about people running off to Cyprus and not paying taxes on their billions).
Getting back around to what the actual prize winnings are ... the amount advertised is if you take the 20- or 30-year payout option. It acts like any other annuity where you have about half the advertised amount invested in the stock market and then monthly payments are made to you such that you have been paid 2x on the investment. This keeps people's federal tax brackets lower in some cases, but also means you don't have the full amount of winnings accrued until the end of that multi-year investment period (and you better hope the payout is truly guaranteed).
I'd be curious to know if it's a better investment to go with the lottery company's choice of annuity company or to take the lump sum and invest it at a large brokerage that's going to treat you like a real high-wealth client ($50-150M+). My take is that life is short and if you die before the end of the annuity it probably isn't doing your next-of-kin any good unless the annuity specifically is transferable to your estate.
From what I remember, you want to go with the lump sum because even just investing in the S&P500 will net you more than you lose in value through inflation with the annuity. But... I could be...
From what I remember, you want to go with the lump sum because even just investing in the S&P500 will net you more than you lose in value through inflation with the annuity.
But... I could be wrong. My assumption is already based on the Netherlands rather than the US, and it's been a while since I verified that.
the annuity is better for people who are not financially educated or responsible; such people are likely to be very well represented among lottery winners i think it makes intuitive sense that you...
the annuity is better for people who are not financially educated or responsible; such people are likely to be very well represented among lottery winners
i think it makes intuitive sense that you could make more money from the lump sum; the annuity essentially relies on the government to manage your money for you, and even something like the s&p500 seems to be too risky for the government (but it's almost certainly not too risky for you)
You'd hope that before even accepting the money the first action of most people would be to hire a financial adviser. That adviser would tell them how to manage that effectively, likely opting for...
You'd hope that before even accepting the money the first action of most people would be to hire a financial adviser. That adviser would tell them how to manage that effectively, likely opting for the lump.
I know that doesn't happen nearly enough, and it's telling when you see the rate of bankruptcy (and suicide) after winning lotteries, but that should be part of the deal.
If anything, and this is a tangent, I think lotteries fail to do their due diligence when it comes to preparing people for this sudden change in their life.
Thank you for changing my mind. I'm sure I picked that up somewhere I thought to be reputable (99PI or something similar comes to mind) where I assume they do their due diligence in what they're...
Thank you for changing my mind. I'm sure I picked that up somewhere I thought to be reputable (99PI or something similar comes to mind) where I assume they do their due diligence in what they're reporting on, but it always turns out there's some misses you take as fact.
Lotteries are just a way to shift tax burden from the wealthy to the poor. We should get rid of them entirely and go back to making the 1% actually pay their fair share.
Lotteries are just a way to shift tax burden from the wealthy to the poor. We should get rid of them entirely and go back to making the 1% actually pay their fair share.
If billionaires are bad, why create more of them? Seems like lotteries should top out at something like $1 million. They could have a lot more winners for the same price.
I remember reading about the powerball many years ago. They reduced the change you would win, and therefore increased the potential payout. It significantly increased the amount of people who would play, so increased tax income.
Tax income which I would assume is paid for by some of the poorest.
Maybe that's a prejudice or stereotyping though.
You're right, but is someone who legitimately blows all their money on the lottery likely to use that money on their own needs? My first impression says no, but I could be completely wrong.
For everyone else, I would expect that the same, say, $5 would otherwise be spent on something that just puts money into a corporation. At least with the lottery, a higher percentage goes to funding schools or whatever.
Not necessarily a fan of the lottery; just thinking pragmatically.
There are many lotteries in California. The Mega Millions is just the biggest of them all. It exists specifically to be a huge number; that is its selling point. Like most lottery tickets, you buy them for the fantasy of winning because the chances of you actually winning is astronomical. If you want something you are more likely to win you could play something like the Daily 3, the last of which had a winner of just over $500 at the time of writing. They also have scratcher tickets which have built-in odds and profit margins - they know they are going to make $x in revenue and spend $y in prizes from the get-go because they print everything ahead of time.
The prize for Mega Millions also scale with the number of tickets purchased since last payout, so this big number means that people keep betting and losing and it has allowed the pot to draw this large. It also means the state has collected a lot of money which will not be going to the winner and will be spent on social programs. They also will not instantly be given that figure. They will be given the option of a lower lump sum or an annuity for the full amount. If they choose the annuity the state can use the money while they have it to invest and make more money from it - they have the time value of money.
On the macro scale the lottery almost certainly does more good than harm. The same is not necessarily true in an individual level.
Does it? Seems like that would be extremely hard to measure. Lotteries are pretty much universally a tax on the poor, so even before you get to the point of spending the money, your funding source is hugely regressive. Even if you're wisely spending all of the state's earnings on education (you're not, running a lottery is a pretty big expense in it of itself), it's almost exclusively poor people funding it with money that otherwise could have gone towards improving their own lives, because the carrot you're dangling in front of their faces that they have a chance, however remote, of escaping poverty is just that tempting.
You could make the argument that having a remote chance of hope in their minds that they'll win the lotto improves their mental health somehow, but I'm not nearly qualified enough to say if that's the case, and it may also be the case that giving people false hope makes things worse in that regard as well.
Lottos in generals have a few pros, but a lot of cons, and it's both very difficult to evaluate all of those against each other, and would be politically unpopular to do so. Politicians get to patch an absolutely massive hole in their state deficits while not increasing taxes, poor people get a distracting and potentially addictive money-sink, and we don't really discuss how much it hurts them in the long run.
The fact that a horrifying number of lottery winners wind up dead or destitute a few years after winning doesn't really tip the scales in the lottery's favor either.
It is regressive. But it is also completely voluntary. If the people who buy lottery tickets were unable to do so, what is the likeliness that they would spend that money on investments instead of other forms of gambling?
Honestly I think that this kind of thinking is really condescending. Do you think the people buying these don’t know what a waste of money they are? The odds are listed. It’s true that most people don’t have a good understanding of statistics but they aren’t morons. It makes them happy. Why does their happiness need your approval? And with a state run lottery it means the money they spend isn’t just lining some greedy despot’s pockets.
And if they really are so bad at managing their money as you make them sound then so what if they end up losing that money? Wouldn’t that be a result of them being bad at money in the first place - which is how they got the money to begin with? Saying winning the lottery caused someone to die is a really big logical stretch.
If the lottery is really that bad, then why isn’t there more popular support to end it? There are people who are anti-lottery in the state of course. It would be weird if there weren’t. But I can tell you that in spite of all the people who I know think it’s dumb to buy lottery tickets, absolutely zero of them are for abolishing the lottery altogether. I asked my husband and he said the same thing. I would be first to agree with you that the lottery is an imperfect thing and that you shouldn’t buy into it. But it’s far from the devil you make it to be.
Yes, it’s certainly true that hardly anyone is against lotteries. Isn’t that odd, though, given how inequality is such a big issue these days? I wouldn’t expect a majority to be against lotteries, but I’d expect the sort of people who want wealth taxes to be against adding more people to the 1% in this way.
Personally, I’m ambivalent, because used in moderation, it can be seen as entertainment.
I mean, if you're for wealth taxes, you'd love lotteries. They are heavily taxed. The lottery tickets are taxed. The winnings are taxed (at the maximum income bracket, almost certainly). That's why many lotteries are state run to begin with.
Whether the money goes to pay for the ticket or to pay the tax, it’s essentially a “tax” on poor people. (If you can consider a voluntary purchase a tax.)
When someone wins, the state gives out the money and taxes some of it back. (I’m ignoring the difference between state and federal taxes.) So this seems more like a way of inflating the headline number for the winnings.
In the end, it’s still creating multimillionaires, if not billionaires, so inequality goes up.
Think of it as perhaps a 50% sales tax on that $5 instead of the 10% the state would get at Walmart. That's extra money for government programs. It creates one extra rich person (at least temporarily) while subsidizing a bunch of government programs, theoretically reducing inequality.
I'd probably count myself among the remaining few, at least to a degree. I'm not against the concept of a lottery itself, but I very much dislike the fact that advertising lotteries is allowed as I see it as a predatory practice given the known risks of addiction regarding gambling and that the advertising industry is so pervasive that fully opting out of it is impossible. To be fair I already hold a very dim view of advertising as a whole, but I see ads for lotteries and gambling as more harmful than most other products, similarly to ads for drugs (for which advertising is banned in my country). Ultimately I would side against banning lottery (and gambling in general), but that's because I believe pushing it into the black market would result in it becoming even more harmful than in its current regulated state, not because I approve of it (also I suspect it would be extremely hard to properly define "lottery" without either more innocent activities being lumped in or leaving obvious loopholes).
I haven't researched this at all, but I think that buying lottery tickets is a relatively benign vice. I seems like a relatively non-addictive form of gambling. I guess it is a tax on the poor like you say, but would that money they spend on lottery be earmarked for nutritious food or going to a wise investment, or would it be used for some other worse form of gambling?
I agree that we mostly hear negative stories about how winning a lottery rarely improves a life. I did a little web search on this, and it seems like the problems are exaggerated a bit and the benefits are minimized a bit. But I'm going off a few opinion pieces and not hard data.
If it helps, it's highly unlikely that this will create a new billionaire. More likely, the world gets a new hundred-millionaire with a lot of personal problems they didn't have before.
Why the Myth of the Miserable Lottery Winner Just Won’t Die
Absolute statements tend to ignore the infinite shades of gray between two points. Tis why only a Sith speaks in absolutes. Not that I'm saying billionaires should exist...
ABAB (All Billionaires Are Bastards) is directed toward the cough cough "self-made" billionaires and the multitude of people they had to exploit to get there.
The winner here also isn't getting a billion dollars; if they take the annuity they'll get $768.6M over 30 years (and that number assumes current tax rates remain steady for the entire time), if they take the lump sum it'll be a single payment of $353,986,416.
Not that I'm saying multi-hundred-millionaires should exist either.
I don't think everyone agrees to this, especially people who throw money at lotteries.
Yes, probably not. But the people who buy lottery tickets don't have any more say in California laws about lotteries than anyone else.
People have responded about the moral side of your question. I'll just point out the monetary side (not that I'm advocating for lotteries).
This lottery isn't really for $1.22B. It's for about half that much as a lump-sum payout (according to the terms of PowerBall and Mega Millions). Then the state the winner resides in and the federal government get a large chunk of those winnings. In a state like Oregon, which a quick search suggests has the highest lottery tax rate, you'd be paying 9% of the total. Then the federal government gets up to 37%.
So states where winning tickets are sold benefit more, perhaps, from higher lottery jackpots. There'd need to be some statistical analysis to see if winning more money less often is better than having more, smaller jackpots won. But the federal government is the bigger winner. And generally big jackpots will put most people in the top tax bracket. I believe that money is taken out of the payout immediately, so the winner never even sees that money (which is why governments aren't concerned about people running off to Cyprus and not paying taxes on their billions).
Getting back around to what the actual prize winnings are ... the amount advertised is if you take the 20- or 30-year payout option. It acts like any other annuity where you have about half the advertised amount invested in the stock market and then monthly payments are made to you such that you have been paid 2x on the investment. This keeps people's federal tax brackets lower in some cases, but also means you don't have the full amount of winnings accrued until the end of that multi-year investment period (and you better hope the payout is truly guaranteed).
I'd be curious to know if it's a better investment to go with the lottery company's choice of annuity company or to take the lump sum and invest it at a large brokerage that's going to treat you like a real high-wealth client ($50-150M+). My take is that life is short and if you die before the end of the annuity it probably isn't doing your next-of-kin any good unless the annuity specifically is transferable to your estate.
From what I remember, you want to go with the lump sum because even just investing in the S&P500 will net you more than you lose in value through inflation with the annuity.
But... I could be wrong. My assumption is already based on the Netherlands rather than the US, and it's been a while since I verified that.
the annuity is better for people who are not financially educated or responsible; such people are likely to be very well represented among lottery winners
i think it makes intuitive sense that you could make more money from the lump sum; the annuity essentially relies on the government to manage your money for you, and even something like the s&p500 seems to be too risky for the government (but it's almost certainly not too risky for you)
You'd hope that before even accepting the money the first action of most people would be to hire a financial adviser. That adviser would tell them how to manage that effectively, likely opting for the lump.
I know that doesn't happen nearly enough, and it's telling when you see the rate of bankruptcy (and suicide) after winning lotteries, but that should be part of the deal.
If anything, and this is a tangent, I think lotteries fail to do their due diligence when it comes to preparing people for this sudden change in their life.
Winning the lottery doesn't have quite the correlation to bankruptcy and sadness as often reported.
And I can't find any info on suicide rates
Thank you for changing my mind. I'm sure I picked that up somewhere I thought to be reputable (99PI or something similar comes to mind) where I assume they do their due diligence in what they're reporting on, but it always turns out there's some misses you take as fact.
Lotteries are just a way to shift tax burden from the wealthy to the poor. We should get rid of them entirely and go back to making the 1% actually pay their fair share.
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