Axiom Home Page Forums General Discussion The Water Cooler OT: Lottery winnings

Imagine this, you just won the lottery for $10 million. In your opinion, how much of your $10 million should the government get? The more responses, the better...

They can take their half or so that they get, that's fine. I'm some lucky guy that just won the lottery, I still get 5 mil. Them taking the other 5 brings down the amount the rest of us have to chip in to the govt., since they are getting the money from somewhere regardless.

Imagine living in a country where lottery winnings are tax free!!!!!

On the Ohio Lottery web site, they show a calculator to estimate your winnings if you chose the lump sum, discounted cash option. It shows federal tax as 25% and state tax as 3.5%, for a total of 28.5%. However, they do say:

"Please note that the jackpot prize calculator will provide you with only an estimate of the annuity prize payment and cash option prize amount. The accuracy of this calculator is not guaranteed. The actual prize award amounts may vary. Therefore, please contact your nearest Ohio Lottery Office to obtain the actual prize award amounts."

But, I don't know if that refers to just the amounts awarded by the lottery, or if it refers to the tax rates also.

I know all this because the Ohio State Lottery is my only retirement plan.

I think the real problem is perception vs. reality. If the taxes were deducted before you were told the prize amount you would feel great about it, no matter what the amount was wouldn't you. If you were told a higher amount and only got 5% you would feel cheated even if you received $10,000,000.

Forgive me, but the more interesting question is, what sound system would you buy?

That's where I thought this was going.

But to answer the question, if you win the lottery, even if you only get 1 million out of the 10 mil jackpot, you're still $1 mil richer.

I say to all the people who feel they've ben robbed by the gov't: quit bitching and be happy you won. You still got free money.

good point......

..and for those in Canada, we don't get taxed until the winnings produce income (if memory serves - not that I have been lucky enough to win more than a few hundred here and there!!!).

Our last few lotteries have been in the $15-25 million range......not quite at the level of some of the US lotteries I hear about, but definitely that much money would dramatically change one's life/family forever.......

and sometimes the changes can be very negative.

The Lotteries are a nice tax scam on the poor (as are the mega slot machine jackpots). Half of the pool is immediately sucked off the top here in California - with 3% going to schools and 47% going to pay for the lottery administration. If the winner elects for the 20 annual payments most of the prize money is never actually awarded, only the interest it earns. If the winner elects for the lump sum, the jackpot is greatly reduced - and then heavily taxed.
I still play, but it's as big a scam as the Calif redemption value program on beverage containers!

Yes, that was what I was driving at.....the negative impact would FAR outweigh the positive in my mind...especially having a large windfall like the recent 649 or Super 7.

Jack, just so that your retirement plan(you're kidding, I hope)is actuarially sound, be advised that the 25% that the Ohio lottery refers to as the federal tax is only the amount that the federal tax law requires to be withheld up front on gambling winnings over certain amounts. The actual tax due, as always, can be more or less than the amount withheld, and in the case of a multi-million dollar win would be the 35% maximum rate. State income tax and those city income taxes which also tax lottery winnings would have to be taken into account. The highest income tax in any state is 11% and if a city tax also applied the total tax could come close to 50%. The amount taxed if a lump sum is taken rather than payments spread over 20-25 years is of course the lump sum rather than the nominal amount of the win. That depends on prevailing interest rates(the lower the interest rate, the higher the amount of bonds the lottery buys to cover the payments)but is in the area of 50% of the nominal win. They have to sell the bonds to pay off in a lump sum, so that's why the precise amount of the cash paid out will vary slightly.

AS BigBear pointed out, in Canada the income tax doesn't apply to lottery winnings. I also understand that the amount won is actually stated in terms of a lump sum so that 100% of that amount is still received. Bottom line of course, is that the whole idea of all of this is still a ripoff.

on a 10 mil dollar lottery i would probably end up with about 20 bucks after the government and THE WIFE

None!

Lousy bloodsucking vampire's! lol. Taxes so i can pay for jimmys mommy and daddy to stay home all day and be lazy living off food stamps, so i can pay for helping rebuild other countries which has no benifits to me, so i can pay for the gov to do basically whatever they want...

Our roads are crap, there are too many laws and restrictions now days, permits for this and that, licenses etc etc. oh give me a break! I go to work to provide for myself and mine, not for everyone else!

Interesting answers. Ok... Another question... Which is bigger in dollar terms, The US Government? Or The combination of Microsoft, General Electric, and Exxon ?

US Govt, for sure. Governments budget is 40% of GNP. Microsoft, GE, and IBM run tight ships because of competition. Where is the competition for the bloated, lazy government?

Mark

Mhorgel is quite correct... The US government is larger than the Fortune 500 combined...

Next question... Specifically, what type of organization is the IRS ? (hint... scum sucking leaches is NOT the right answer... though I would not argue that point... )

Scum sucking leeches! I don't CARE if it's NOT the right answer. Actually, I don't mind paying taxes. I mind our tax money being wasted, or flat out skimmed. THAT is the real problem.

It is a corporation... Let's try multiple choice. The bottom 50 % of wage earners in the country pay 3.9 % of taxes... What percentage of total income do they earn ?

1. 7 %
2. 3.9 %
3. 13 %
4. 2%

Yes, you are correct, the amount is a lump sum pay out of the entire amount. There is no payment plan.

I love these questions Craig.



(And I love where you're going with this, I think )

The bottom 50% of income earners, while paying 3.9% of federal taxes, earn 13 % of the income. This number comes from the IRS, and does not include things like the earned income tax credit, child tax credits... etc... that 3.9% is a lower in reality.

The Top 50% earn 87 % of the money, and pay 96.1 % (again, more than 96.1 % when taking into account the EITC and child credits the "bottom 50%" gets) of the taxes.

So... If you think about it, the US Government (meaning the taxpayers) cannot do any more to alleviate the tax burden on the lowest 50% of income earners. They have no tax burden.

Do I mind that ? As someone who spent the first 1/2 of his life there in the lower 50%, no.

Another stat ... The top 1 % pays 38 % of all taxes on 20 % of income. In other words, for every $1000 that top guy makes, he pays 7 times as much in taxes as the average bottom 50% guy.... Note, that is for EVERY $1000 ...

It seems to me that there is plenty of competition between the different congressional districts to bring home the pork and keep the home voters voting to re-elect. Competion between the parties to redistrict and control the election outcomes. Is that what you meant?

I think he is referring to the lack of market pressures on gov't, resulting in inefficient bureaucracies. IOW, if the gov't had to compete with other, non-gov't entities in the delivery of goods and services, they would have to be more efficient - less wasteful of taxpayer dollars - if they wanted to stay in business.

. . . has anyone else read David Baldacci's "The Winner"? It deals with this exact topic - great read.

I've read all of Baldacci's books. He's one of my favorite authors.

I apologize if my cynical sarcasm was not evident enough. It is clear what the doctor meant. I am not inspired by the ways in which our tax dollars are spent and the ways in which our votes are manipulated in the competition for control by the political parties.

My local district was represented by a polition spouting fiscal conservation and supporting anything that brings federal dollars back to the district without much regard for the overall philosophy he purports to support.

Aha, I see that now.
Of course, pork barrel stuff isn't the exclusive domain of either party. Arnold has been attempting some reforms here in Calif and the legislature (and those who own the legislators) is going after him. It is very tough to buck the system - even in little baby steps like Arnold is taking.