2 4 23 38 46 & 23.
If you’re one of the mega millions of people that played the lottery last week, then you’re familiar with those numbers.
I was, along with all of you, not one of the winners. But unlike all of you, I couldn’t be happier that I didn’t win. Of course, I guaranteed my ‘success’ at not winning because I never bought a ticket.
There are three main reasons that I have never played the lottery and I never will.
1 – A Sociological Reason
The problem with the lottery is that it makes poor people feel poor. Various studies have shown that low-income participants are more likely to play when they believe that they live below an implicit standard. In other words, poor people play the lottery because they feel poor.
This may not be earth shattering news for any of you, but what may come as a surprise is that other studies have shown those making less than $13,000 in annual income spend anywhere from 5%-9% on lottery tickets.
Which is why many people refer to the lottery as a Regressive Tax on the poor. What the government isn’t able to take from the poor in taxes, they take in state-sanctioned gambling. Other call it a positive feedback loop, where the poor play the lottery which keeps them poor which keeps them playing the lottery.
Meanwhile the state governments* (and federal governments by taxing the winnings) are making literally tens of billions of dollars ($53 billion in 2010) off of the poor. Plain and simple, the lottery is a state-legalized gambling system that exploits the poor.
* The state of NJ took in nearly $2.5 billion from lottery sales in 2010. [source: census.gov]
2 – A Mathematical Reason
[If you are intimidated by numbers, then feel free to skip this section.]
In order to be informed, you need to recognize some of the mathematical gymnastics that the lottery system plays on us. A few of the tricks they play:
• First of all, it’s not $640M you’re winning. You’re winning a $640M annuity paid out over 26 years.
• Based on current interest rates, the actual cash out is $462M
• Then in NJ you pay 10.5% income tax (in addition to all of the money NJ made on ticket purchases) so $48.5M goes to NJ in taxes.
• Then about 35% goes to the federal government in income tax. (After you deduct your state tax payment) Your federal tax payment would be $144.7M.
• So out of the $462M, you pay $193M in taxes and your take home is $269M.
Your odds of picking the winning number are 1 in 176 million. So, the proper strategy would be to drop $176M and pick every possible number and pocket the $269M. However, that only works if you can assure that no one else plays the Mega Millions. Which is kind of difficult to do. Because estimates are that there were upwards of 680 million tickets purchased. Which means that if I won, I would have to then share that with the three other winners from Maryland, Kansas and Illinois. So, my share after splitting and after sharing would “only” be $67.25M*.
* I get it. It’s not a small number, but it certainly is a far cry from $640M that gets published.
So, even though the winners get to take home $269M, think of the ~$680M that the states get in proceeds and taxes (that’s double dipping!) and the federal government gets in taxes. They just made $411M off of all of us!
And this happens every day, all over the US (43 states have lotteries): scratch offs, mega millions, powerball, whatever.
By my calculations, you’re basically given a 39 cent return on your $1 ticket. Which means for that for every $1 you spend, you get 39c back. Or in other words: bad investment. And yet, according to one study, 21% of people polled believe the lottery to be sound financial planning or actually, worse: “a practical strategy”. (Those numbers are worse for lower income who saw the percentage rise to 38%.)
How society sits idly by as this Regressive Tax continues to exploit the lower income, while having governments double dip in proceeds and taxes is unconscionable.
3 – A Spiritual Reason
Perhaps most instructive to me as to why I wouldn’t want to win $640M is because I wouldn’t be better off. Oh sure, I’d be better off financially, but there’s no question in my mind that I would be worse in perhaps every other area of my life. The plain truth is that I am not ready to be $269M richer.
The apostle Paul states in I Timothy 6:6-10 states a warning that should be enlightening to us all.
“But godliness with contentment is great gain, for we brought nothing into the world, and we cannot take anything out of the world. But if we have food and clothing, with these we will be content. But those who desire to be rich fall into temptation, into a snare, into many senseless and harmful desires that plunge people into ruin and destruction. For the love of money is a root of all kinds of evils. It is through this craving that some have wandered away from the faith and pierced themselves with many pangs.”
God doesn’t want you to be happy because you won $640M he wants you to be happy because you’re content with what he’s given to you. God’s desire for you is not for you to be rich; his plan for you is for you to be forgiven of your sins*. Particularly during this week’s celebration of Holy Week, Good Friday and Easter Sunday, God has certainly given us enough to be happy about.
* “[God] wants all men to be saved and to come to a knowledge of the truth.”
~ I Timothy 2:4
So, don’t be beset by greed, don’t feed the system and don’t further exploit the poor.
My son opened his fortune cookie during dinner at the Oriental Buffet on Bergen Blvd. and I wish it could become the mantra of all lottery losers.
To be upset with what you do not have is to waste what you do have.
Epilogue: Please enjoy this infographic on the Lottery by Mint.com.