I think the best comment about the lottery came from my barber, Lenora at Curley’s Barber Shop, who said, “If you play the lottery for income you are a loser.” From any practical standpoint she is right. However, it is amusing to look at some of the aspects, both good and bad, of the lottery.
First, let’s look at the odds of winning. Note that the state pays out about half of the jackpot if you have a winning ticket.
Next, the government wants about 40 percent of what you win. This means that the jackpot has to get to 3.33 times the inverse probability of winning. That is if in power ball your chance of winning is about 1 in 5 million the pot has to get to about $17 million before the size of winnings justify the small chance of winning on a probability basis.
It is amusing to know that years ago a group of people got together and formed a company to buy up all 14 million possible numbers in a state lottery. They waited until the pot got to about 50 million dollars before buying the numbers.They formed some type of corporation so that they could deduct the cost of the tickets from the tax liability and were allowing for the possibility that some other people might also have winning tickets. They made a profit on the deal, but the state then outlawed such practice.
There are a few good points about the lottery. First, it is the only completely voluntary tax I can think of and there is no way it can be used against any particular individual or group. Second, there is no way it can be used to punish hard work and industry and reward sloth, indolence, bad behavior and failure as happens with so many things the government is involved with.
Some cynics have labeled the lottery a tax on stupidity and ignorance. That sounds good.
The most destructive thing about the lottery is that some people spend enough money on it that they could have a nice nest egg if they saved and invested instead. Some authors have said that about 25 percent of Floridians think that the lottery is their only way to financial independence rather than saving and investing.
One irony of the Lottery is that the money is supposed to go for education. If it were going for really good education, very few people would be playing by now.
One other really sad irony of the lottery is that about one third to one half of the winners go into bankruptcy. This is due to the fact that so many winners have no idea how to handle money. The most common error is to start buying things on time without doing any analysis to see how much money is being committed. Often in doing this they end up with more funds committed than they have coming in even with the large amount of money available.
An attorney told me a story of a client who won a state lottery and then died a few years later. It took years for the attorney to get the estate out of debt because of the huge buying commitments the deceased had made.
The winners are also besieged by requests for money and overwhelmed by the changes in their lives and the changed attitudes of their friends.
However, have no fear. The probability of winning is quite small so you most probably won’t have to cope with these problems. In the meantime play sparingly if you must and save and invest your serious money.