Pewaukee Economics & Finance : The Lottery is a Scam

Sophia Brussow

Turning 18 is a milestone for many; you're now not only considered an adult, but you have new responsibilities and

new freedoms. You can vote, you could enlist in the military, you can buy spray paint or fireworks, or you could buy a lottery ticket.

In 2017, Americans spent $71.8 billion on the lottery, with such a small window of opportunity to win, is it worth it?

“The $70 billion Americans spend on lottery tickets translates to roughly $230 per person, including children, per year.

That’s a lot of money that’s not being saved for retirement or used to pay off credit card debt.” Amelia Josephson, Smartassest.com.

Let's say you’re that 1 in 13,983,816 and you win the lottery. The drawing is 515 million dollars, now the Mega Millions

lottery gives you a choice. You can either get the money paid out over 30 years or you get all the money in cash

right here, right now. You take the cash so you can buy a new house, a new car, and maybe a private jet, right? Wrong.

Not all that money is yours, you have to pay taxes first.

The minute you turn in that winning ticket, the federal government automatically taxes 24% of it, so now you’re left

with $346.3 million whether you take the payout or the cash. After that, if you take the cash option, the federal government

automatically taxes an additional $83 million…now instead of $515 million, you’re left with about $218 million. But

you still have to pay state taxes, these taxes differ depending on the state, but in Wisconsin, the lottery winning tax

is 7.65%. Lottery retailers also receive a small compensation on the tickets they sell, and on winning tickets. In the

end, you are left with around $167 million. From half a billion dollars to a little more than a million.

Realistically, the odds of winning the lottery are so slim and unfortunately, the odds are never in your favor, for many

people the urge of striving to win the lottery has caused major gambling addictions and has put many families in

more debt. “People with a household income of less than $10,000 a year who play the lottery spend $597 a year

on tickets,” according to the New York Times. Money that was used to purchase losing lottery tickets, is money that

could’ve been invested and saved.

The lottery is seen and advertised as an easy way to get rich because all you have to do is buy a $2 ticket and you

could win millions of dollars when in reality, you’re losing millions of dollars. It starts as “I just had to try it.” and turns

into “Maybe this time I’ll win.” It’s so easy to continue to spend dollar after dollar because in the moment $2 feels

like nothing, just some extra cash in your wallet but it adds up quickly. Many people after winning the lottery go into

major debt because they don’t know how to spend money efficiently, beneficially, or correctly. Millions of dollars are

worth nothing if you don’t know how to spend it. Why spend hundreds on the lottery when you could be investing and saving

hundreds to live a comfortable life.

Pewaukee Economics & Finance