Powerball Jackpot - Disgraceful

[boomhauer]

I just read this and it makes me sick.

8 people pooled in, won the $365 million jackpot. After taxes, for taking it in a lump sum, they get $15.5 million each. That means, $124 million goes to the winners, and $241 million goes to the government.

I'm sorry - That is absolutely disgusting.

 

[drgnfly30]

Actually the winners opted for the cash option so they didn't get $365 million but more like $177 million - so only about $53 million when towards taxes.

 

[boomhauer]

I don't understand the difference. The jackpot is what the jackpot is - $365 million.

Obviously, it was the winners choice to take the cash instead of the annuity, but that doesn't lessen the jackpot.

 

[Tigger_Magic]

Your math is a little off. The winners had a choice of taking the money in a single lump sum or installments over 30 years. By selecting the lump sum option, the actual jackpot payout DECREASES to $177.8 million. Of that $54.34 million is taken out in taxes or about 30%. If they had taken installments, they would have shared about $6,507,986 after taxes (annually) or around $813,500 (a year). This is how lotteries work -- if you take a lump sum payout it is almost always less than the advertised jackpot.

Either way, if I were one of the winners, I wouldn't find paying taxes disgusting. Not if I were pocketing what they are getting.

 

[mickeyboat]

Actually, there isn't that amount sitting in a vault somewhere, it's an estimated annuity value which includes the projected growth of the money over the life of the annuity.

Also, the whole point of the lottery is for the state and federal governments to make money.

Denae

 

[bsnyder]

I don't think you'll find much support for changing the confiscatory tax rates for lottery winnings, even among die hard tax reform advocates. It's a windfall based on pure luck, not any hard work on the part of the winner.

 

[boomhauer]

OK - I see. I didn't realize that. Since everyone almost always takes the cash, why don't they just say $177 million?

 

[drgnfly30]

I don't understand the difference. The jackpot is what the jackpot is - $365 million.

Obviously, it was the winners choice to take the cash instead of the annuity, but that doesn't lessen the jackpot.

Yes it does...

 

[froglady]

And if they invest it, they're going to have to pay taxes on the interest/dividends unless they can put it all into tax sheltered investments, to be taxed later.

Welcome to the wonderful world of the IRS. Also, does IL have a state income tax? They'll get their share, too.

I'm used to seeing more than 1/3 of our income go straight to the government every year, so it doesn't surprise or bother me that this happened.

 

[kbkids]

I knew that but never understood why people would go for the lump sum instead of the annuity. I mean, $800,000 a year income would be more than sufficient for our family!!

Taxes, yes, necessary evil. I wouldn't complain either when I was raking in that much!

 

[Shugardrawers]

I believe most lotteries give you the option of a 20 or 25 year annuity or a lump sum payout, generally 50% of the jackpot. With smart investing, that lump sum could actually wind up being a LOT more than the original jackpot.

 

[Tigger_Magic]

OK - I see. I didn't realize that. Since everyone almost always takes the cash, why don't they just say $177 million?

Because $177 million doesn't sound as "good" as $365 million. And $177 million doesn't qualify as the largest jackpot in U.S. history, but $365 million does.

It's all about the hype. Got to keep people believing they actually have a reasonable chance of hitting it big without doing any real work.

 

[mickeyboat]

I knew that but never understood why people would go for the lump sum instead of the annuity. I mean, $800,000 a year income would be more than sufficient for our family!!

Most people feel they can earn more by investing the money themselves than depending on the growth of the annuity.

Denae

 

[boomhauer]

It's more of a personal gripe with me than anything.

When I lived in the town I grew up in, I never complained about taxes. Roads were taken care of, snow was removed, garbage was removed, etc. I moved to a bigger city about 2 years ago, pay MUCH more in taxes, and they don't do anything. There's 4 pot holes on my street alone, the roads are never plowed, and the main streets are just a disaster.

My wife and I sit there some nights and just wonder - What is our local tax money going to?

 

[kbkids]

Most people feel they can earn more by investing the money themselves than depending on the growth of the annuity.

Denae

That's kinda what I figured. Let's hope they are disciplined enough to do it and not spend it all!!

 

[Trish Bessette]

They ended up with 22.1 million each....I'll take that

 

[eyeoreismyhero]

I knew that but never understood why people would go for the lump sum instead of the annuity. I mean, $800,000 a year income would be more than sufficient for our family!!

Taxes, yes, necessary evil. I wouldn't complain either when I was raking in that much!

If I'm not mistaken if one takes the annuity and then dies the next day, there is not right of survivorship for the family to continue to receive the yearly payments. I would take the lump sum payout for that very reason and ensure my familes financial future and not bank it on my mortality.

 

[kbkids]

If I'm not mistaken if one takes the annuity and then dies the next day, there is not right of survivorship for the family to continue to receive the yearly payments. I would take the lump sum payout for that very reason and ensure my familes financial future and not bank it on my mortality.

Ooo - now that would be an even better reason than being able to invest it myself. Absolutely!

 

[toto2]

here in Canada ( at least here in the province of Québec) you dont pay tax on lottery winnings , since lottery is already a volontary tax. And you dont pay tax on your first year of earning from your gain. But the biggest gain so far is around $32 million canadian ( wich is not too bad !)

But any way , anytime you buy a lottery ticket in the USA , you are supposed to know that you are going to pay taxes on it , so it should not come as a surprise. But it is totaly illogic that the governement takes back what it gives !

 

[declansdad]

Another difference in Canada is that when we have a 30 million dollar lottery, the winner gets the 30 million. It is not based on an annuity like in the US.


Of course we don't have 365 million dollar lotteries either.