Here’s a more serious post about lottery after my Powerball Musings post from before the last drawing.
It’s nearly criminal what the government is doing to all of us sheeple that choose to buy into the one in a trillion get-rich dream. Any other practice does this and it’s predatory, but not for the states under the lottery commissions. They say buying a ticket is a stupid tax, and it certainly is. The only one getting rich is the state coffers. And heaven forgive you end up a winner in a state like Illinois that was freezing lottery winnings since until recently their state budget was still being decided.
Let’s start at the beginning. Only a part of your $2 ticket actually goes to raising up the jackpot. Each state is a little different, looks like New Jersey has a 40% rake (Rake being a term that casinos use for what goes back to them in any gambling game. A typical slot machine’s rake is 10%, maybe 5% in roulette, and about 1% for games blackjack to give you some perspective), Texas lottery rake is over 65% (with less than 35% going to the actual jackpot).
According to Kelly Cripe, director of media relations for the Texas Lottery Commission, precisely “34.0066 percent of each sales dollar is contributed to the jackpot.
For shits and grins and to keep the math simple, let’s say that combined, the states average 50% rake. That means the $930 million cash payout for tonight’s draw really has generated $1.86 BILLION in ticket sales, with half going to the states and half to the jackpot. That’s just the start though.
We all know you get taxed on the winnings of jackpot or some split of the jackpot. I’ve seen a lot of places saying that they take 25% for the feds off the top, plus your state tax (for our state it’s something like an extra 7%). But that doesn’t count the additional 14.6% as income, which lottery winnings count as (39.6% is the top tax rate, of which most of that jackpot will count towards, so let’s keep the math simple). So adding in the state tax, if I were to win, my winnings would be reduced by nearly half again (46.6% tax) before I saw a penny, equating to $433,380,000 in taxes, leaving me with $496,200,000. A fuck ton, sure, but about equal to the taxes (after they already took the rake).
The end score is Government = $1.4 billion, “winner” = $0.5 billion (or Government wins 3x more than the “winner”), all paid for off the backs of the working class dreamers.
You tell me, is this fair? It basically gives the government an excuse to be even more inefficient as they can draw upon their poor and middle-class constituency to fill gaps in funding that is already inefficient and fucktarded to begin with.
So what is the solution AMD? Prize Linked Savings. Freakonomics did a nice piece on this. It works like this. Instead of giving 75% of every lottery dollar to the government, you open up a savings account at a bank. The bank pays you an interest rate (zero to whatever) less say, a quarter point (0.25%). They use your money to invest and do stuff that banks do, but the 0.25% interest they skim off the top goes into a pool, and once a month people win big prizes from that pool, like a lottery (though obviously not lotto scale). If you lose (most likely to happen), you still have savings in the bank. Sounds fucking great right? Win-win (save, plus have a chance to win some dough). Except in most states it is illegal. You think the gubment wants a competitor to their monopoly on printing money? Progress is being made though. Federal legislation that prohibited this has been removed, and some state loopholes exist.
If you want to see if your state has something like this (it is targeted at low income consumers – those that have less discretionary income that they spend on lotto), check out this article about prize linked savings (PLS) from non-profit Doorway to Dreams that feels the poor are getting hosed by this lottery racket too.
Keep this in mind after the hub-bub of this big jackpot goes away. Don’t be a daily buyer. Find a better way to save your money. Buy a ticket if it gets big, $1 or $2 spent is a fun way to dream, but don’t be this guy (who blew $1000 on his dream for tonight’s drawing).
And good luck out there! I’m hoping someone I know (or who reads this) wins!