MarketWatch contributor Cullen Roche, founder of Orcam Financial Group LLC, explained that “the real winner of the lottery system is not the person who buys the winning ticket”; “[t]he real winner is the government, which taxes the winner.”
According to Roche, the feds automatically withhold 25 percent and then toss the winner into the highest tax bracket if he/she chooses to go with the lump sum option.
If someone were to win in Washington, D.C., for instance, he or she would only go home with about $416 million versus $1.3 billion. That’s quite the cut, aye?
Moreover, 15 percent of the revenue from the lottery itself goes toward marketing it, while 25 of it goes toward funding meaningless state poverty programs that Duke University economics professor Charles Flotfelter argues have no “meaningful positive economic effect:”
I find the whole lottery system rather disturbing. It preys on our behavioural biases and irrational understanding of money. So while the media will widely tout the “winner” of any drawing, the real winners will be the government entities that spend millions to promote a program that does little public good and hurts those who need the money most.
The whole thing is kind of a sham, not that it doesn’t pay to play, because let’s be honest — $416 million is still a LOT of money!
Still, though, if you decide to play it, just remember that even if you “win,” the government will still be the biggest winner of all!