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Wednesday, August 22, 2007

If you're going to be a fool, now's the time

Those of you who, like me, pay the stupidity tax from time to time, take note: Saturday's Powerball jackpot will be $300 million. The cash option should pay about half that, right? Which would be $150 million.

The odds of winning the big prize are 146,107,962 to 1. And so for once, they're paying decent odds, if you're the only one with the magic numbers come this time Saturday night.

If you do win, remember that you read about it here. I'll cover any gift tax that you owe on what you flip my way.

Comments (12)

Whats the tax for a $150 million dollar payout? Somewhere in the 50% range?

According to Powerball.com, the cash option is $140.3 million.

It occurred to me recently that a lot of endowment-funded organizations follow a strategy of only spending the income that spins off the endowment - and never touching the principal.

If I remember right (and I might not), the annual income is usually pretty consistently around 5% of the total value of the endowment... into perpetuity.

So, if you got $140 million cash, paid $70 million in taxes, and then invested the remainder like an endowment... you'd then get $3.5 million a year in income - forever. That's $291,000 a month.

Right? Where's my math off?

It's not.

I'm in.

Whats the tax for a $150 million dollar payout?

Feds, roughly 35%. Oregon, roughly another 9%. There are some asterisks, but it doesn't reach 50% -- more like 45%.

Of course, if you make money buying and selling stocks, it's 15%...

Kari, and if you spent the $3.5 million every years (maybe more like $2 million after taxes), there'd still be $70 million in the bank at all times.

Mega-Millions up here in The Couv is $200+ million right now too. I have tickets for both.

My wife (who has a degree in mathematics) likes to point out that, statistically speaking, your chances of winning are effectively equal whether you buy a ticket or not. ;-)

I heard the PDC is "investing" in Powerball as a "linchpin".
They are purchasing some $5 million tickets on behalf of their favorite public-private developer partners in hopes of genrating the $300 million return for their friends.
After the draw Saturday they intend on quietly claiming success as the $5 million will have been spent.

As with other linchpins winning won't be neccessary once the spending has occured.
They need only establish that more spending will follow and pretend it's the same as winning.

My wife (who has a degree in mathematics) likes to point out that, statistically speaking, your chances of winning are effectively equal whether you buy a ticket or not. ;-)

Ask her how I can get myself on the list of people who won it without buying a ticket.

Double your money instantly!

Fold it and put it back in your pocket.

The words 'investment' and 'lottery' should never be used in the same sentence.

The 6/49 lottery was brought to France by Cassanova when he escaped confinement in the Italian city states. The lottery in France grew to proportions that almost equaled the Tulip Mania in Holland. Casanova ofcourse got rich several times via the lottery, by selling tickets not by winning it.

The NetPresentValue of that stream of income can be a tidy sum but most lottery winners let the money trickle away in lifestyle changes that are poorly planned.

A lottery is indeed a tax on the mathematically feebleminded. Ofcourse, one may wonder if that is not a class of persons who should be taxed. We have "sin taxes" levied on alcohol and tobaco, why not a 'stupidity tax' levied on those foolish enough to buy lottery tickets.

As to the mathematically similar chances for non-ticket purchase, that is true. Its only the administrative classification of 'ticket purchaser' that is significant. Once that hurdle has been reached, the chances are about the same as before. "You can't win if you don't play the game; but if you play the game, your chances of winning are about the same as before you paid your game-entry fee".

A PassLine bet at 100x odds offers a house edge of 0.09 percent against the player. Even a blackjack game offers about a 2 percent house edge. Roulette a 5.25 percent house edge. That is known as gambling. A lottery is not gambling, it is a voluntary gift to the state by those who are deluded.

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