Kinda has a stench of “the wealthy get taxed too much 😢”
The IRS doesn’t get that money. The IRS processes that money and prevents your lottery-ticket-buying-ass from hoarding it all, and redistributes some of that unnecessary wealth to the utilities and services were all invested in together as a society.
This is what happens if you take it out as a lump sum. If you choose to take your winnings over an extended period of time (20 years or something), it is taxes more like income.
That said, I totally agree with you!
A significant amount is “lost” when you get immediate payout versus the annuity. The lottery will invest and be able to pay out more over the thirty years, thus they offer less the the lump sum
On 1.2 billion over 30 years, the average tax rate will not be significantly different year to year vs the avg tax rate on a lump sum.
The poor smuck probably claimed the lottery as an individual. He should have opened a company and claimed the ticket so that he can expense out a lot of his taxable income
/s
I am 99% sure this is not how it will work in this specific scenario but does otherwise when it’s business as usual.
Congratulations to the lottery company who was allowed to advertise a $400m prize as $1.28b.
So we do all realize that advertised jackpots are annuitized amounts and that the vast majority take the net present value lump sum, which is usually about half the advertised amount, right?
Winner probably got about six hundred million, of which roughly forty percent was taken for taxes give or take state income tax rates.
Not being from the US I didn’t know that. That takes something from being completely unreasonable to be understandable.
I can’t believe some fake rich guy on the internet lied to us!
Still, if they’re not idiots the winner doesn’t have to work again so they’re still good.
That takes something from being completely unreasonable to be understandable.
Why would taxing a gross income of above a billion US$ by ~66% be “completely unreasonable”? Imo taxes for such incomes should generally be higher if anything.
Because that’s not how it works. It would be great if that was how it worked for all billionaires but it isn’t.
Taxing 66% of the winnings of someone who was previously not wealthy is unreasonable if you don’t also tax other rich people at the same rate.
I was with you till the last paragraph. The numbers are already there for you, so I don’t know where 6 hundred million came from.
The $1.28 billion is if you take monthly payments over a term of twenty or thirty years.
Very few people do that.
Instead, they take an up front lump sum payment.
That up front payment is the amount the lottery commission would put into interest bearing bonds to pay out over time, getting to the $1.28 billion.
The lump sum payment is usually about half the amount you would receive if you took payments over time. If this doesn’t make sense, it’s a tangential discussion on the time value of money and its net present value.
I got six hundred million by cutting $1.2 billion in half since this is casual Internet discourse, and I consider very rough cocktail napkin math for illustrative purposes to be perfectly acceptable.
But you didn’t need to do back-of-napkin math, at all. He got $433.7 million.
Damn, only half a billion dollars you didn’t have before. Might as well not even bother.
Is it even worth collecting the prize at this point?? /s
