Cruelest Tax of All: How Cynical Lottery Rule Changes Ruined Jackpots

Everyone dreams of one day winning the lottery.

But as the jackpots continue to grow bigger and bigger, a cynical rule change has snuck under the noses of the American people that may have ruined them forever.

Six jackpot prizes have surpassed the $1 billion mark since 2016, with three of the biggest payouts ever coming in the last year.

And while an anonymous Maine ticket holder became the second-richest winner in history last month when he netted $1.35 billion, his chances of joining them are sadly slim to none.

In 2017, the officials behind the Mega Millions lottery updated their rules to ensure that the jackpot prizes continually increase, attracting more players to participate and reducing the odds of winning at the same time.

Now, experts warn that the predatory lottery system has been rigged to generate more revenue for the government, while poor communities are paying the price.

Lottery ticket sales have skyrocketed from $47 billion in 2005 to more than $80 billion today.

The 2017 rule change was made after Mega Millions officials were concerned that ordinary winnings could cause the public to lose interest in the game.

So, to avoid ‘jackpot fatigue’, lottery masterminds decided to up the ante, mocking potential multi-billion dollar payouts while quietly lowering the odds of winning by expanding the range of numbers available and increasing the odds. ticket prices.

According the washington postthe rule change meant that his odds of winning the regular Mega Millions jackpot increased to one in 302,575,350, while the odds of also winning the ‘Mega Number’ for the big payout became one in 88 quadrillion.

As rollovers and additional players result in ever-larger jackpots in state and national lotteries, including a world-record $2.04 billion jackpot last year, governments across the United States continue to cash in.

It’s no secret that governments make a lot of money from the lottery. Only about 50-60% of lottery funds go to winners, while US state and local authorities funneled about $26.94 billion into their coffers in 2020, compared to just $1.69 billion in 1982 , according to statist.

State governments take a share of about a third of every lottery jackpot, and the US Census Board estimated in 2015 that state lotteries raised more than $21 million for state governments, not to mention the state governments. even higher payouts from multi-state lotteries like Mega Millions.

But for people who can beat the odds, they’re also in for a rude awakening when they’re also faced with a hefty tax bill.

This happened to one lucky winner last year in Illinois, who walked away with a $1.28 billion prize, at the time the second-biggest in history.

Almost all lottery winners choose to take the lump sum instead of receiving their winnings in stages, which reduces the total winnings they receive. In this case, the payment was reduced to $747.2 million.

In particular, the IRS takes up to 37% of lottery winnings. This cut meant that after jackpot winnings were sifted through multiple tax brackets, the total take-home payout was just $433.7 million, it reports. Forbes.

As millions of Americans continue to be sold on their dream of becoming billionaires, experts have warned that the people who pitch in are often the poorest and most desperate in society.

A 2017 rule change introduced by the Mega Millions lottery increased jackpot prizes to billions, but also lowered the chances of a winning ticket.

States get more money as more people play, but some have warned that this dynamic has led to poorer communities being targeted for aggressive lottery expansions.

Some of the biggest lottery wins in history have been made in recent years. Pictured are Maureen Smith, center, and David Kaltschmidt, right, of Melbourne Beach, Florida, who earned more than $528 million in 2016.

Those who study the system have argued that the lottery is fundamentally predatory, targeting communities that need it most, while most people with higher incomes don’t feel the need to play.

Numerous studies have shown that lottery sales are highest in low per capita income communities. and the investigation of Howard Center for Investigative Journalism Found shops that sell lottery tickets are disproportionately found in the poorest areas of every state in the country that has a lottery.

States make more money from their lotteries based on how many people play, a dynamic that drives them to continually and aggressively try to expand.

It’s this system that’s behind the huge growth in recent jackpot prizes, the study found, as nationwide lottery ticket sales have skyrocketed from $47 billion in 2005 to more than $80 billion today. .

But in addition to increasing the lure of winning billions, this ever-growing prize pool has also filled state budgets across the country.

Amid concerns that the lottery is disproportionately diverting money from poorer communities, the study surprisingly found that lotteries generated more revenue than corporate income taxes in ten states last year.

“Poor people are collateral damage to the cause of raising money for what lawmakers consider good purposes … public safety, local schools,” said Gregory Sullivan, a former Massachusetts inspector general.

“State governments become dependent on revenue and any moral considerations are out of sight and out of mind.”

In a scathing rebuke of the lottery system, Les Bernal, the national director of Stop Predatory Gambling, condemned it as a form of “consumer financial fraud.”

He said KSL: ‘(The poor) are hoping to pay their rent at the end of the month or pay off an outstanding medical bill or send their kids to college or just lost their job and are just trying to find a way to make ends meet.

“And here you have what is a government program that encourages citizens to lose their money in rigged games.”