It’s a tax that people voluntarily choose to pay. If you choose not to pay it, there is no penalty. The choice is made by the taxpayer, not the bureaucrats. It is much friendlier than income tax or property tax.
Oh, hey, we actually won $8! On a $10 ticket. So…cashing it in, throw another $2 at it and we’ll do it again. Because now it’s amusing me that it’s pissing off DCnDC. More entertainment.
Wonder how much white reindeer feed $10 will buy …
It’s now at 700+ million annuitized, cash out 428 million before taxes.
Might not be quite supervillain-lair league (have you priced underground-complex construction and mercenary forces lately? ridiculous!) but should provide for quite a stately pleasure-dome with exotic feature attractions on the grounds.
Usually not, as chances are the probability of nobody besides you winning is quite small, so your share of the prize divided by the probability of winning is still less than the cost of the ticket.
Besides - you have to take federal tax into account (I am assuming none of the states involved charge state income tax on Powerball lottery winnings), as well as the reduced value of the prize if you take it as a lump sum.
All but six states charge state income tax to their resident lottery winners. Furthermore, if you buy a ticket in one state but live in another, some states charge a lottery tax on nonresident winners who buy in their states.
As Peremensoe stated, you assume wrong. Details here (not 100% updated, from looking at PR’s line).
Yeppers, I and the rest of my department pooled money and we’ll be buying $70 worth. It’ll be split 14 ways. $700 million is a humongous pot.
A $5 bet once or twice a year is the extent of my gambling, so I don’t feel too bad about it. Cheaper than going to Vegas.
Since nobody has asked me yet, I’ll just rudely elbow my way in with the Hebrew Scriptures, the Book of Proverbs, Chapter 30, verses 8-9:
“Give me neither poverty nor riches;
feed me with the food that I need,
or I shall be full, and deny you,
and say, ‘Who is the Lord?’
or I shall be poor, and steal,
and profane the name of my God.”
Now, I am a non-traditional theist, and I don’t take the Gospel as gospel, but I think that that is admirable practical advice for happy living. I’m not ready for the headache of 200+ mil. And I don’t play the lottery.
The other thing to take into account is that the chances are that there will be multiple winners. Also, they only withhold 25% for federal taxes and you’ll end up owing another 15% or so. That said, with a lump sum payout if you are the only winner, you’ll still clear better than 200 million after taxes. Stash that in CDs or short-term Treasuries at today’s crappy rates of 0.5% and you still get a million a year before taxes (or at least 500k yearly after taxes) to play with without ever touching the principal. I believe I could live quite comfortably on a half a million yearly.
And to clarify, I bought a ticket on NYE day for the 1/2/16 drawing and lost the ticket later that same night.
In regards to throwing away my money, I see it as paying for a fantasy, the same way I might pay to eat a candy bar. Sure, it’s throwing the money away on something that only gives momentary pleasure but at least the lottery isn’t as fattening.
I won’t be buying any tickets but I don’t find this “expected value” analysis terribly convincing. If you were to repeat the lottery ticket purchase millions of times then perhaps it would make for a sensible analysis, but even then it wouldn’t account for the pleasure some people experience from gambling.
Would you wager your entire net worth for a 51% chance of doubling your net worth? The expected value is positive.
I find it so completely strange that there are people who never buy lottery tickets unless the jackpot is crazy money. Like, 7 million wouldn’t make a difference in their lives or something…:roll eyes: (Damn, that’s such a shitty roll eyes…)
And for the people who don’t play because the odds are so minuscule: fair enough, totally makes sense. But the fact is that people win all the time. And it’s absolutely impossible to ever be one of those people if you never play. It’s not impossible if you do.
it’s not that those people think 7 million is worth playing for, it’s that the lottery is so frequently at 7 million that they would spend more money trying to win than they want to spend. So once in awhile it gets up to insane amounts, it’s easier to buy that rare ticket to try to imagine what it would be like to when an absurd sum of money. 7 million is a lot of money, more than most of us need. But 500 million is entertainingly ridiculous.
This is me. And that is what my dad always says too. I just can’t get past the utter futility of pinning my hopes on beating those odds.
I never buy lottery tickets for ordinary jackpots because I don’t even think about the lottery most of the time. It’s only when the jackpot becomes so large that I can’t help but hear about it that I even consider buying a ticket. (Which is what the lottery people want. A big jackpot gets everybody talking, which advertises the tickets to people like me.)
I’ll pile on. With the current jackpot of a $2 ticket is $2.72. That is doing math! Anytime the Powerball jackpot is greater than about $491 million, there is a positive expected value.
That can be refined by looking at taxes (but as has been pointed out, any investment will be taxed) or by looking at the lump sum versus annuity. Not as straight forward because unless you are going to spend it all immediately or put it under you mattress, the winnings will likely grow.
The next part is the opportunity cost. What else could you do with that $2. If your decision is whether to buy food or buy a lottery ticket that is different than if your choice is to buy a fourth cup of coffee of the day or buy a lottery ticket.
The final part is whether, for you, there is any fun in gambling. When these jackpots get big people talk about it at work, think about what they’d do. Most of those people aren’t crushed when they don’t win but enjoy the diversion.
Don’t forget that there is a chance that you could split the pot. And with a higher jackpot, more people will enter, increasing the chance of a split pot. I bet there’s a curve to expected value with these lotteries. It slowly increases until the huge jackpot get more entries than normal, and it goes back down.
Exactly. Most all of us know that playing the lottery every week is just essentially throwing away $52/year at a minimum, even if we have higher chances of winning a state lottery $1.1 million prize than the 500 million Powerball one.
But there’s a difference- I can easily imagine what I’d do with a $1 million windfall, and it doesn’t even come close to being anything fantastic- invest it in college funds, rainy-day funds, get parts of our house renovated, and maybe get a couple of new cars.
$500 million starts getting into the “Do I want a mountain lair, or my own island?” type fantasy questions. And I realize that anyone can fantasize about this kind of thing without buying a lottery ticket, but spending that $1 to make the fantasies just barely achievable if by some astronomically unlikely chance I win is well worth it. It’s the difference between knowing for sure that you’ll absolutely never see $500 million, and knowing that yes, you have some microscopic chance.
Call it statistical homeopathy if you want, but that tiny chance makes all the difference in the enjoyment of the fantasies.
I didn’t, because if I bought a ticket and didn’t win, it would bother me a lot. As in, brooding over it. And since the others are so spectacularly again me, it’s just not a good idea in my case.
Missed edit window. I meant “odds” of course, not “others”.
We have fourteen people kicking in $5 each in my pool, and I just went and bought thirty-five $2 tickets. I’ve distributed photocopies of all of them to all participants and have stashed the originals.
It’s at $800 million now.