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Thread: How does lottery work?

  1. #1

    How does lottery work?

    Ok, I know it's a gambling and guessing game, where the lucky man wins a jackpot of millions.

    My question is this, if the goal is for the government to collect taxes, why not just tax on the ticket purchase, and reduce the allocated prize amount? In which case, you can report the "net" amount, and make it tax free to the winner?

    For example, if the jackpot is $100M, does that mean they sold 100M tickets for $1 each? If so, why not just tax the prize in advance, and declare that, if the effective tax rate is 30%, there's only $70M as prize money claimable, and the winner does not need to report any additional taxes?

    Would that just make too much sense and put too many people out of business?



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  3. #2
    Quote Originally Posted by onlyrp View Post
    Ok, I know it's a gambling and guessing game, where the lucky man wins a jackpot of millions.

    My question is this, if the goal is for the government to collect taxes, why not just tax on the ticket purchase, and reduce the allocated prize amount? In which case, you can report the "net" amount, and make it tax free to the winner?

    For example, if the jackpot is $100M, does that mean they sold 100M tickets for $1 each? If so, why not just tax the prize in advance, and declare that, if the effective tax rate is 30%, there's only $70M as prize money claimable, and the winner does not need to report any additional taxes?

    Would that just make too much sense and put too many people out of business?
    I can't speak to you plan, but I'll tell ya how the lottery works for me: I hop in the car and ride the 50 miles to Tennessee (since lotto tickets are a sin in Alabama,) buy about $50 worth of tickets, drive the 50 miles back to the Heart of Dixie, watch as my numbers aren't drawn, repeat again when the jackpot surpasses $125m. The only thing I do that is more mindless is sticking Skoal in my mouth every day...they are both pretty fun though!
    ROLL TIDE ROLL!!!
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  4. #3
    Quote Originally Posted by BamaAla View Post
    The only thing I do that is more mindless is sticking Skoal in my mouth every day...they are both pretty fun though!
    Skoal Extra for the win.
    Pfizer Macht Frei!

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  5. #4
    States already keep a good chunk of the money before the payout. Then they tax it again, after someone wins whatever they pay out.

    Massachusetts has the highest payout of lotto sales: 71.9%.
    Louisiana has the lowest payout of lotto sales: 51.0%

    http://media.bloomberg.com/bb/avfile/r3nbpFLrUooE

    A quote from the article: "According to Bloomberg's study, state-run lotteries 'have the worst odds of any form of legal gambling' in America."

    http://www.dailyfinance.com/2012/03/...D147238_maing5
    Last edited by enoch150; 03-30-2012 at 04:00 AM.
    "Government is not the solution to our problem; government is the problem."
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  6. #5
    Here's how it works...

    Step 1) gov't puts population through 12 years of "schooling" that conveniently fails to teach them how to apply simple math to something like the lottery.
    Step 2) ????
    Step 3) Profit


    there's underpants in there also somewhere I think

  7. #6
    I call the lottery "the tax on stupid". And now my wife bought into a Mega Millions pool at work.

    In many states gambling is illegal but state sanctioned gambling, aka the lottery, is a monopoly with extremely low odds of winning.

  8. #7
    Quote Originally Posted by fr33 View Post
    I call the lottery "the tax on stupid"...
    Try, "Voluntary tax for mathematically challenged optimists."

  9. #8
    I bought my first ever lottery ticket today. I wasn't even carded, which kind of angered me.



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  11. #9
    Quote Originally Posted by BamaAla View Post
    I can't speak to you plan, but I'll tell ya how the lottery works for me: I hop in the car and ride the 50 miles to Tennessee (since lotto tickets are a sin in Alabama,) buy about $50 worth of tickets, drive the 50 miles back to the Heart of Dixie, watch as my numbers aren't drawn, repeat again when the jackpot surpasses $125m. The only thing I do that is more mindless is sticking Skoal in my mouth every day...they are both pretty fun though!
    Redneck
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    NO MORE LIARS! Ron Paul 2012

  12. #10
    I have a theory that you have almost the same chance of winning the lottery if you don't buy a ticket as you do if you buy a ticket.
    (i once found a ticket in the parking lot that was a $5 winner. Also, my mom puts 5 tickets in everyone's Christmas stocking and Easter basket.)

  13. #11
    Quote Originally Posted by FindLiberty View Post
    Try, "Voluntary tax for mathematically challenged optimists."
    We're not even mathmatically challenged!

    The odds of winning are 1 in 176 million. The payout is double that. Looks like a sound investment to me

  14. #12
    I think the idea is to keep lottery winnings in the same category as gambling winnings as far as the tax code is concerned, an excemption of certain types of gambling winning would just be more confusing.

    On the plus side, if they at least give them to you then you can use some of the money on stuff that can get you a tax break.
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  15. #13
    As much as I don't care for the lottery, the fact that my wife invested in a pool of tickets now has me daydreaming how it would change my life. It must play upon some basic human instinct or something.

  16. #14
    George Orwell was right once again.

    From "1984"

    The Lottery, with its weekly pay-out of enormous prizes, was the one public event to which the proles paid serious attention. It was probable that there were some millions of proles for whom the Lottery was the principal if not the only reason for remaining alive. It was their delight, their folly, their anodyne, their intellectual stimulant. Where the Lottery was concerned, even people who could barely read and write seemed capable of intricate calculations and staggering feats of memory. There was a whole tribe of men who made a living simply by selling systems, forecasts, and lucky amulets. Winston had nothing to do with the running of the Lottery, which was managed by the Ministry of Plenty, but he was aware (indeed everyone in the party was aware) that the prizes were largely imaginary. Only small sums were actually paid out, the winners of the big prizes being non-existent persons. In the absence of any real intercommunication between one part of Oceania and another, this was not difficult to arrange.
    “The spirits of darkness are now among us. We have to be on guard so that we may realize what is happening when we encounter them and gain a real idea of where they are to be found. The most dangerous thing you can do in the immediate future will be to give yourself up unconsciously to the influences which are definitely present.” ~ Rudolf Steiner

  17. #15
    Quote Originally Posted by fr33 View Post
    As much as I don't care for the lottery, the fact that my wife invested in a pool of tickets now has me daydreaming how it would change my life. It must play upon some basic human instinct or something.
    To people like your wife, is winning 2 million much different than, 20 million, 200 million?
    In all cases, you'll be debt free, set for life, and you'll die the same year.

  18. #16
    Quote Originally Posted by fr33 View Post
    As much as I don't care for the lottery, the fact that my wife invested in a pool of tickets now has me daydreaming how it would change my life. It must play upon some basic human instinct or something.
    That's the best part about the lottery. I think that's why most people play - paying a couple dollars for a sweet daydream. Probably worth it.

    Quote Originally Posted by onlyrp View Post
    To people like your wife, is winning 2 million much different than, 20 million, 200 million?
    In all cases, you'll be debt free, set for life, and you'll die the same year.
    Definitely not set for life with $2mil. That only equals out to about $50,000/year.



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  20. #17
    Quote Originally Posted by brandon View Post
    That's the best part about the lottery. I think that's why most people play - paying a couple dollars for a sweet daydream. Probably worth it.



    Definitely not set for life with $2mil. That only equals out to about $50,000/year.
    Well if you took $2 million FRN's and bought gold and silver with a portion of it, you would be much better off.
    “The spirits of darkness are now among us. We have to be on guard so that we may realize what is happening when we encounter them and gain a real idea of where they are to be found. The most dangerous thing you can do in the immediate future will be to give yourself up unconsciously to the influences which are definitely present.” ~ Rudolf Steiner

  21. #18
    Quote Originally Posted by brandon View Post
    That's the best part about the lottery. I think that's why most people play - paying a couple dollars for a sweet daydream. Probably worth it.


    Definitely not worth it! I believe this type of daydream is harmful to the human psyche. It directs focus away from real, attainable goals. It nourishes the notion that there is an easy way out. Sure, you can't win if you don't play, but you also can't fly if you don't flap your arms.

    I've seen people that actually convince themselves that they might win. Then, when they don't, they go through a regretful, almost mournful period only to start it again when the pot grows big again. Now, not everyone gets thsi carried away, but even in small increments, I think this daydream is damaging.

    With all the said, I did get into a pool at work - but I have no illusions that we are going to win. I do it more as a social thing more than anything else. And if, by some miracle they did win, I wouldn't want to be the only one left! lol.
    "And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works." - Bastiat

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  22. #19
    Quote Originally Posted by brandon View Post
    That's the best part about the lottery. I think that's why most people play - paying a couple dollars for a sweet daydream. Probably worth it.

    Definitely not set for life with $2mil. That only equals out to about $50,000/year.
    That's your problem, not mine. I'm more than set for life on $2M, and I'm not Amish. "Only" $50,000 a year for doing nothing? I feel sorry for anybody who can't do it.

  23. #20
    Quote Originally Posted by onlyrp View Post
    To people like your wife, is winning 2 million much different than, 20 million, 200 million?
    In all cases, you'll be debt free, set for life, and you'll die the same year.
    Christ, and I thought I gave off negative waves.

    I'm Norman Vincent Peale compared to you.

    LoL

  24. #21
    Quote Originally Posted by donnay View Post
    Well if you took $2 million FRN's and bought gold and silver with a portion of it, you would be much better off.
    Not even, you'd be debt free, have a few houses, a few cars that you'll never worry about repairing. Unless of course you're currently in $2M debt.

  25. #22
    Quote Originally Posted by CaptUSA View Post
    Definitely not worth it! I believe this type of daydream is harmful to the human psyche. It directs focus away from real, attainable goals. It nourishes the notion that there is an easy way out. Sure, you can't win if you don't play, but you also can't fly if you don't flap your arms.

    I've seen people that actually convince themselves that they might win. Then, when they don't, they go through a regretful, almost mournful period only to start it again when the pot grows big again. Now, not everyone gets thsi carried away, but even in small increments, I think this daydream is damaging.

    With all the said, I did get into a pool at work - but I have no illusions that we are going to win. I do it more as a social thing more than anything else. And if, by some miracle they did win, I wouldn't want to be the only one left! lol.
    I hear ya. Everything in moderation I guess. Sometimes I get a bit carried away with the daydream. I just spent the last 15 minutes looking up million dollar homes in my area I'm in an office pool too.

  26. #23
    Quote Originally Posted by brandon View Post
    I hear ya. Everything in moderation I guess. Sometimes I get a bit carried away with the daydream. I just spent the last 15 minutes looking up million dollar homes in my area I'm in an office pool too.
    I see why you can't live on $50,000 a year even if you didn't work. Now I see why Americans are never satisfied with what they have.

  27. #24
    Quote Originally Posted by onlyrp View Post
    That's your problem, not mine. I'm more than set for life on $2M, and I'm not Amish. "Only" $50,000 a year for doing nothing? I feel sorry for anybody who can't do it.
    Quote Originally Posted by onlyrp View Post
    Not even, you'd be debt free, have a few houses, a few cars that you'll never worry about repairing. Unless of course you're currently in $2M debt.
    Quote Originally Posted by onlyrp View Post
    I see why you can't live on $50,000 a year even if you didn't work. Now I see why Americans are never satisfied with what they have.
    A few houses can easily incur real estate taxes of $20,000 annually. A "few cars that you'll never worry about repairing" implies at least 3 leased vehicles at an ongoing cost of $12,000 annually. So before gassing up or turning on the heat at these three houses, $32,000 of a $50,000 budget is already blown. Add $5000 for individual health insurance and $15,000 if you are a family (in good health). If you live off the land and spend nothing else, the government will still borrow $5000 or more annually in your name and create an even greater amount of unfunded liabilities.

    At $50,000/year, people still have to make hard choices about where they live, what they drive, who they support (family). It won't be a Rolls Royce that you park in Manhatten at the four-bedroom penthouse supporting a brood of six kids.

    Considering the taxes, lottery winners are better described as "set up" than "set".

    Lottery is a bad investment: http://www.taxfoundation.org/news/show/1302.htm



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  29. #25
    Quote Originally Posted by The Free Hornet View Post
    The key figure in that analysis is the expected return. The data assumes a 53% expected return on the lottery but today's mega millions will have an expected return of greater than 100% (even after taxes and the possibility of splitting the jackpot with one other person). Lotteries usually never offer an expected return greater than 100% but today is one of those times.

  30. #26
    Quote Originally Posted by brandon View Post
    I hear ya. Everything in moderation I guess. Sometimes I get a bit carried away with the daydream. I just spent the last 15 minutes looking up million dollar homes in my area I'm in an office pool too.
    Lottery is for the mathematically challenged...but you can't win if you don't play.
    Pfizer Macht Frei!

    Openly Straight Man, Danke, Awarded Top Rated Influencer. Community Standards Enforcer.


    Quiz: Test Your "Income" Tax IQ!

    Short Income Tax Video

    The Income Tax Is An Excise, And Excise Taxes Are Privilege Taxes

    The Federalist Papers, No. 15:

    Except as to the rule of appointment, the United States have an indefinite discretion to make requisitions for men and money; but they have no authority to raise either by regulations extending to the individual citizens of America.

  31. #27
    Quote Originally Posted by onlyrp View Post
    To people like your wife, is winning 2 million much different than, 20 million, 200 million?
    In all cases, you'll be debt free, set for life, and you'll die the same year.
    With 2 million I wouldn't quite be set for life but I'd be comfortable. 20 million I'd be set for life. 200 million my extended family would be set for life. In all cases I'd keep working, just not as hard.

  32. #28

  33. #29

    How does lottery work?

    I was one of the big winners.

    When California's lottery first started they said the odds were going to be 2 to 1. For every two dollars you spent the odds were you would bet back one. Well I bought a couple of the first tickets they put out. I won a dollar. I knew if I wanted to remain a big winner I should stop right there. Buuuuut noooooo. I am a fool.

    I don't think there is anyway to still get a dollar return for two spent on any of the games they have. They have gotten the rules so complicated it is hard to keep track of them. I am still thinking I should be keeping them to their word about the 2 to 1 odds though. I've never heard of an official change to what we agreed to when the vote was taken.

    Something else I remember from the election. The schools were suppose to get a third of the money and any unclaimed prize money. I sort of remember checking in on them and hearing of them getting a third. The thing is I have some unclaimed tickets. I'm sure with the rules as complicated as they are others have them also. I've never heard of the schools getting any more than a third.

    Annnddd.... knowing all this.....I'm in for the big one tonight! A record-breaking $640 million prize.

    That's the way it works in my neck of the woods.

  34. #30
    I remember a story from Fark.com a while back where a guy figured out one of the scratch games.


    This was the Fark headline:

    The science behind the idiot tax


    This is a link to the page in the story that explains how the system works (Page 3):

    http://www.wired.com/magazine/2011/01/ff_lottery/3/


    This is a link to the Fark comments:

    http://www.fark.com/comments/5943240...hind-idiot-tax

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