Friday, October 05, 2007

How Can Lotteries Claim They Have a $1 Million Jackpot When the Winner Only Gets About $250,000?

I've never personally won a large lottery or gambling jackpot, but boy will I be pissed when I do. For those who don't follow these things, the way these enormous lottery jackpots work is like this: If you win, say, 100 million - you can either accept the money in 20 annual payments of 5 million each, or, you can just take 50 million right now (approximately) and walk away.

What this means, to put it as plainly as I can, is that you've only won 50 million. You didn't win 100 million. Sure, you could stockpile your 5 million payments for 20 years and then show me the whole 100 mil, but you could take the 50 million lump sum, invest it safely, and produce the same 20 year outcome. In other words, you've only won 50 million.

And then, even after you've been given the $50 million instead of the $100 million, you've got to give half of that to Uncle Sam. To put it simply, this blows.

So we've ended up with a state of affairs where any posted jackpot or huge cash prize is really only going to net you ONE QUARTER OF THE WHOLE THING if you actually win it. Does this get anyone else as angry as it does me?

How about I sponsor a lottery, only 1 dollar to enter... And the grand prize is a cool million. Yep, I will pay you a million dollars. However, the prize will be paid out in the form of an annuity payment of $1 a year. For a million years. Don't worry, it will be a trust and payments can continue to go to your descendants. Or... if you don't like that idea - you can take one single lump sum payment of $14.28. Which, assuming a generous interest rate, is how much my prize is actually worth.

But hey! A million dollars right! No. No it's not a million. And this lump sum, annuity payment bullshit is no different. It's just a lie. That's all it is. I propose that all stated jackpots and lottery payouts be publicly advertised, displayed and posted as the post-lump-sum, after-tax amount. So if the prize says 5 million, and you win - you actually get handed a tax-free check for $5 million. Am I wrong? What position would you rather be in? a) You win a $5 million jackpot and get handed the tax-free check for the whole amount, or b) You win a $20 million jackpot, and then you find out later that it really only adds up to about 5 mil?

In situation A I'd be jumping for joy. In situation B I'd be seriously pissed off. The local TV reporter would put a mike in my face and say "So Rowsdower, how does it feel to win $20 million?" And I'd be like "Uh, that's... $5 million, Jim. It's just $5 million." He: "Did you ever imagine you'd be a millionaire 20 times over?" Me: "Well, like I said, there's no $20 million. It's only $5 million." He: "How are you going to spend $20 mill-" Me: "Look would you shut up about the 20 million please! It's JUST 5 MILLION."

This is just common sense everyone. Let's stop inflating our jackpot promises up to these lofty imaginary numbers. Post-lump-sum, after-tax figures only. Sure, the powerball will never get up past 50 or 75 mil anymore, but I think we'll all be a little happier for the honesty.

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