Poor Tax

[Ominous Gamer]

General consensus around here is the the lottery is a poor/stupid tax, but...

The powerball is at 900 million. Who is going to give it a shot?

[RandBlade]

The lottery is a voluntary stupid tax that is predominantly opted into by the poor.

The odds of winning the jackpot is 292 million to one which superficially means that it makes logical sense to buy a ticket when the jackpot is 900 million however that's only because of rolled over failures by the previous mugs who've paid into the tax fund without winning. Furthermore you get taxed on the winnings but bought your ticket on already taxed income so it is doubly-taxed. Post tax the lump sum is 419 million not 900 million.

Finally I believe if you and someone else get the winning number then you'll end up sharing the prize.

As for me, no I wouldn't be tempted no matter how high the number got. Quite frankly £5 million or £500 million either number is life transforming and not going to happen.

[Veldan Rath]

My gameing group go in every week.

So your stupid comment can go suck it. It's a lark, and we enjoy it.

[wiggin]

The lottery is a voluntary stupid tax that is predominantly opted into by the poor.

The odds of winning the jackpot is 292 million to one which superficially means that it makes logical sense to buy a ticket when the jackpot is 900 million however that's only because of rolled over failures by the previous mugs who've paid into the tax fund without winning. Furthermore you get taxed on the winnings but bought your ticket on already taxed income so it is doubly-taxed. Post tax the lump sum is 419 million not 900 million.

Finally I believe if you and someone else get the winning number then you'll end up sharing the prize.

As for me, no I wouldn't be tempted no matter how high the number got. Quite frankly £5 million or £500 million either number is life transforming and not going to happen.

It can theoretically make sense to play the lottery if the expected value is higher than the face value of the ticket. It's a tiny chance, yes, but it's still a rational decision. It's hard to determine the real expected value of a ticket, though, because we don't know how many people play at very high jackpot valuations (which increase the chances of splitting the ticket). There's lots of data for the relationship between jackpot size and number of players at the lower end, but at unprecedented jackpot sizes it's hard to know whether curve fits from that data will still be a valid model outside the regression range.

Even so, I've seen people run models on the data that suggest the $2 Powerball ticket is worth more than $2 once you get to jackpots over ~$400 million. Of course, you need to take the annuity rather than the lump sum to make any money in the deal. Throw in taxes, though, and you might still lose out no matter what.

[RandBlade]

My gameing group go in every week.

So your stupid comment can go suck it. It's a lark, and we enjoy it.

I have no problem with you spending money for fun. I am talking about people who spend money on it because they think it is a smart thing to do.

Its the same as other forms of gambling. If you do it for fun then great. Until recently I played for the last couple of years in a pub poker league. Paid £5 towards the pot (split between winner and runner up) and typically £6 on three pints through the night. I never played with the intent of winning money, I played with the intent of a fun night out and £11 for a fun night was what I viewed as my cost that I was happy to play. Won a few times and the winnings were a nice bonus when it happened. A few people in the group had more serious gambling issues and were there for the gambling not the fun and went to casinos and other gambling nights (as well as betting on sports on an app while we were playing) - those people I worry about not those who do it for fun.

[wiggin]

A pint of beer is only 2 quid?

[Veldan Rath]

Must be PBR...or the Brit equivalent...yuck.

[Timbuk2]

in this here london town you wouldn't get a half for 2 quid

~

do the lottery most weeks - and am in a loooong-running syndicate

have winnings of over £2k - which includes a big syndicate win - though i have probably spent that to date so am about even I reckon

it's for the tiny chance of the big win anyway

[Lewkowski]

Saw this gem...

https://www.reddit.com/r/AskReddit/c...ottery_what_do

Congratulations! You just won millions of dollars in the lottery! That's great.
Now you're fucked.
No really.
You are.
You're fucked.
If you just want to skip the biographical tales of woe of some of the math-tax protagonists, skip on down to the next comment, to see what to do in the event you win the lottery.
You see, it's something of an open secret that winners of obnoxiously large jackpots tend to end up badly with alarming regularity. Not the $1 million dollar winners. But anyone in the nine-figure range is at high risk. Eight-figures? Pretty likely to be screwed. Seven-figures? Yep. Painful. Perhaps this is a consequence of the sample. The demographics of lottery players might be exactly the wrong people to win large sums of money. Or perhaps money is the root of all evil. Either way, you are going to have to be careful. Don't believe me? Consider this:
Large jackpot winners face double digit multiples of probability versus the general population to be the victim of:
Homicide (something like 20x more likely)
Drug overdose
Bankruptcy (how's that for irony?)
Kidnapping
And triple digit multiples of probability versus the general population rate to be:
Convicted of drunk driving
The victim of Homicide (at the hands of a family member) 120x more likely in this case, ain't love grand?
A defendant in a civil lawsuit
A defendant in felony criminal proceedings

[RandBlade]

A pint of beer is only 2 quid?

Not in all places and definitely not in the South. In my local in Warrington I drank at they did one brand of beer at £2 as a bit of marketing (they had a big poster outside offering it), as it happened I rather liked the [German] beer that they did on that offer.

I charge between £2.95 to £4.10 a pint depending upon the brand of beer.

[Ominous Gamer]

Now that we have the holier than thou attitude out of the way in the GC, the pot is up to 1.3 billion. So glad I don't work in a convenience store right now.

[RandBlade]

If you open a thread with a title like "Poor Tax" and say in the OP something like "poor/stupid tax" then are you really surprised to get a discussion started? Seemed to be your intent ...

I'm assuming nobody won last time then? I wonder how much was spent on losing tickets?

[Ominous Gamer]

If you open a thread with a title like "Poor Tax" and say in the OP something like "poor/stupid tax" then are you really surprised to get a discussion started? Seemed to be your intent ...

I'm assuming nobody won last time then? I wonder how much was spent on losing tickets?

I made a thread in the GC acknowledging preexisting positions in order to ask a question in the hopes that old arguments wouldn't need to be rehammered. Rand you are oblivious as a babe in a butcher shop.

There were 18,315,365 winning tickets, with $1 million winners spread across 14 states. No one won the jackpot, so thats why it went up again.
The organization that runs it says more than a $1 billion in tickets were sold, and they cost either $2 or $3.

[RandBlade]

Don't be obtuse. You could have entitled the thread after the lottery or something else and said you're not seeking a debate and don't want to rehammer arguments.

Instead you deliberately (or ignorantly, I assume deliberately) chose a provocative title and OP more suitable for other forum.

[Ominous Gamer]

the pot is up to 1.3 billion.

Up to 1.5 now with a couple of hours left before they shut down sales. ~97% chance of someone winning, based on fivethirtyeight's best guess Estimating more than a billion tickets sold. If everyone used California's ratio, that would amount to more than a $800 million influx of cash into our education system. Sadly not all states do that Florida for example will use their funds to replace other funding instead of supplementing it.

[Timbuk2]

so 1 person could walk away with $1.5bn ???

[RandBlade]

Minus taxes and as an annuity over 29 years.

[Timbuk2]

The draw has taken place in the US for the biggest single single lottery jackpot in history - $1.5bn (£1.04bn).

There are at least three winning tickets in the Powerball jackpot - sold in Los Angeles, Tennessee and Florida - lottery officials said.

The previous draw was the 19th without a grand prize winner, which requires all six numbers to match.

Thousands of people earlier queued up outside shops across the US, hoping to defy the odds of 292.2 million to one.

The winners can collect their winnings in annual payments over 29 years, or opt to share a lump-sum payment of $930m.

The government would also share in the big prize, however, levying a 39.6% federal income tax on the winners, plus any taxes that the winners' home states may impose.

"The winners can collect their winnings in annual payments over 29 years, or opt to share a lump-sum payment of $930m."

So each of the 3 winners would have to agree to go with a lump-sum, or agree to go with the annuity? Has to be one or the other for all 3?

[RandBlade]

That's very bizarre if true, wonder if that's just shoddy reporting?

So a reported jackpot of $1.5bn if taken upfront (which is standard on this side of the Atlantic, plus tax-free) is actually a $310mn share and after taxes about $187mn each? So nearly 10% of the headline figure each for three people?

The figures are very massaged compared to here where it is all given at once and tax-free.

[Ominous Gamer]

So each of the 3 winners would have to agree to go with a lump-sum, or agree to go with the annuity? Has to be one or the other for all 3?

No. The almost 1.6 billion dollars is split into 3. Taxes are removed. Each winner then decides how to take their share. If you opt for lump sum a percentage is lost from your share.

[Aimless]

I can't even get my mind around those sums. I've always been fond of discussions about what we'd do if we won $$$ on the lottery but even with Swedish jackpots it can get a little difficult to figure out how I'd like to use the money after the obvious (hair-transplant, fresh vegetables). With these insane prizes I wouldn't know where to begin. A person could, if they were so inclined, literally wipe their ass with $100 bills every day for the rest of their natural lives or until paper money is discontinued or the US goes under and still be able to lead a comfortable or even decadently luxurious existence. Crazy.

Would you guys take the lump sum?

[Flixy]

That's very bizarre if true, wonder if that's just shoddy reporting?

So a reported jackpot of $1.5bn if taken upfront (which is standard on this side of the Atlantic, plus tax-free) is actually a $310mn share and after taxes about $187mn each? So nearly 10% of the headline figure each for three people?

The figures are very massaged compared to here where it is all given at once and tax-free.

Over here the government lottery is also tax free (which kinda makes sense as it's already a government cash cow ).

Up to 1.5 now with a couple of hours left before they shut down sales. ~97% chance of someone winning, based on fivethirtyeight's best guess Estimating more than a billion tickets sold. If everyone used California's ratio, that would amount to more than a $800 million influx of cash into our education system. Sadly not all states do that Florida for example will use their funds to replace other funding instead of supplementing it.

I always think it's a bit weird to link specific expenditure to specific income to be honest, especially for something as important as education. It's kind of fucked up that funding for education depends on how big the lottery jackpot is...

[RandBlade]

I would absolutely not take a lump-sum. The only* reason to take the lump sum is either if 1/29th of the prize is not enough to live off annually or you can use the lump sum to set up a business or other set of investments that will provide a greater return than taking the sum. Assuming a share of $500mn then $17 million a year is enough to live off and set up a business etc if you're so interested.

* Unless there's other terms and conditions, eg the rest of the annuity is lost if you die rather than going to your estate.

I agree Flixy. Education should be fully funded whether people gamble or not. I like our National Lottery set up - the funds go to so called "good causes" that struggle to get tax funds otherwise - eg Museums, the Arts, Sports etc

[Flixy]

Or if you need to pay off your gambling debts of course

Even the non government lotteries here tend to fund things like that here, I guess because it makes people feel better by buying it I guess.

[RandBlade]

Or it might be a licensing condition.

[LittleFuzzy]

It's generally a licensing condition, there's a moralistic opposition to gambling and it is not welcomed by most states. That sort of countervailing "constructive" social purpose is the only way most state legislatures will let such organized gambling be allowed within their respective jurisdictions.

[Dreadnaught]

I offered all my friends up to $100/each to pay for lottery tickets. They get to keep the winnings. I get 10% interest/week. So far seems like a sure deal for me.

But the lottery, like casinos, make me sad.

[Ominous Gamer]

Would you guys take the lump sum?

If its something thats over a million bucks a month I see no reason to. So... about 350 million would be my cut off. The only thing you have to worry about with installments is the lottery surviving 30 years. In installments you can have fits of stupid spending or thrifty investing and you'd only have to worry about the rest of the year. Very few people are equipped with the knowledge on how to manage a huge sum of money, or who to trust with managing a large sum of money, and not having access to all of it at one time and help you learn from your mistakes.

Plus when the beggers come begging you can use the line "sorry blew this installment on hookers and blackjack"

[wiggin]

If its something thats over a million bucks a month I see no reason to. So... about 350 million would be my cut off. The only thing you have to worry about with installments is the lottery surviving 30 years. In installments you can have fits of stupid spending or thrifty investing and you'd only have to worry about the rest of the year. Very few people are equipped with the knowledge on how to manage a huge sum of money, or who to trust with managing a large sum of money, and not having access to all of it at one time and help you learn from your mistakes.

Plus when the beggers come begging you can use the line "sorry blew this installment on hookers and blackjack"

A million bucks a month? Seriously? I'd even take $10k a month or less; that's still enough to essentially add another salary to our household and dramatically change our options without having to lose a bunch up front. Generally it's hard to beat the predicted return of the annuity over 30 years. Also I don't think the lottery needs to survive - I think they purchase a financial instrument that is then earmarked for you.

As for managing the money, I never understood this. Sure, the people who live paycheck to paycheck will have no idea what to do. But your average upper middle class Joe already manages investments - after that, it's just a question of scale, and that's why there are professionals who do this for a living. I would probably just ask the richest person I know who they use for wealth management and start there.

I'm more worried about the social effects of someone so publicly getting rich. The best approach IMO is to buy your ticket in a state that allows anonymity; that lets you pocket the cash without your random acquaintance from high school looking you up. Of course, eventually it would get out - benefactors and investors rarely stay anonymous for long - but it would take a lot longer through word of mouth than through a big media blitz.

[Ominous Gamer]

If I'm going to be rich I'm going to feel rich

12 million a year would be the sweet spot for that without going overboard. Thats still more than I could picture spending which would lead to a sorta forced understanding of saving and investing. Even at that level theres stuff you can't pay straight cash for. How much did Notch's house cost? Although I'd likely travel more than anything.