Blottery

There’s nothing pressingly Wallingford on our radar at the moment, so instead you’re going to have to put up with our anti-lottery screed, sorry.

We understand that some sort of mega lottery (MegaMillions) has reached $325 million and some of you likely saying “hey, I’m a smart puppy, I know my maths: a $325 million pay-off when the odds of winning are 175 million to one? That’s a good bet!”

It’s not, and if you’ll stick with us, we’ll explain why. After that, we’ll explain why the lottery is the anti-Robin Hood, stealing from the poor.

See, if you were to somehow win, they’re not just going to hand you one of those oversized checks written for $325 million. Instead, they break it up into 26 annual payments. What that effectively means is that you’re giving the lottery people an interest free loan that they have 26 years to pay back. They’re saying to you “if we win, you give us your money now, but if you win, you’ll get your pay-off 26 years from now.”

Another way to look at it is that they’re not really allocating $325 million for you. Instead, they’re allocating a smaller amount, investing it, then paying you with the interest the investment earns. Calculating it all would be difficult, but fortunately, they do it for you: the “lump sum cash option” is explicitly equal to “all the cash in the Jackpot prize pool” and it’s set at $204 million, according to their web site.

“OK,” you’re saying, “I still like those odds: $204 million payout on 175 million to one odds.” Not so fast.

You forgot taxes.

You’ve already paid taxes on the dollar you’re spending to buy the ticket, but you’ll have to pay taxes again on the money you win, and let us tell you: if you win the lottery, you’re in the top tax bracket. Let’s call it 34%. So now that $204 million just became $135 million.

But, we’re not done yet.

You only get the whole jackpot if you’re the only winner, and as more people play, the odds of you being the only winner decrease. It’s difficult to calculate the impact of this, but suffice to say there has never been a single winner of a $325 million jackpot, according to Wikipedia’s lottery jackpot records. Instead, those large prizes are typically split between anywhere from 3 to 14 winners.

Mega Millions Official HomeBut let’s go ahead and be kind and assume you’ll only split it with 3 people. Your $135 million just became $45 million.

Now, a $45 million payout at 175 million to one odds? That’s like saying we flip a coin, and if we win, we get your dollar, and if you win, you get 25 cents.

If you’re up for it, we’ve got the coin.

Seriously, you’re much better off going to Las Vegas and pulling the one-armed bandit. There, they’ll give you anywhere from 80 to 90 cents on the dollar, compared to the lottery’s 25. Blackjack is better yet: you can get close to 98 cents on the dollar, and they’re bringing you free drinks!

But our main beef with the lottery isn’t that it’s a lousy investment. Rather, it’s that the lottery is effectively a regressive tax. The lottery is played predominantly by those who can least afford to lose: you don’t think Gates and Buffet are playing Scratch and Win, do you?

No, it’s people who are living close to the edge who are lured into taking money that ought to go to food, clothes or credit card bills and spending it on “a dream”. What happens when they lose? A cascade of impacts, many of which come back and impact not just the loser, but all of us: foreclosures, welfare, food stamps, and medicare all come back around, increasing the burden that everyone has to shoulder.

To round out the obscenity of it all, the MegaMillions web site’s home page has a huge picture of a piggy bank with the words “Save for retirement” written over it.

Obscene.

  1. Chuck said,

    How about you give me $135 million if I win the coin toss? I’ll even bring the coin. If you win you can keep it, if I win, pay up.

    I’m usually with you Wallyhood, but I have to say on this one, what a load of crap. If someone wants to spend a dollar to win $325, or $204, or even $45 million why do you care? By and large people aren’t blowing their life savings on the lottery, like say casino games, they’re throwing the extra couple dollars down at QFC for a chance to win.

    And drop the patronizing “we’re stealing from the poor” BS. People know what they’re doing. Being poor doesn’t make you stupid. We can all see the odds, they’re clearly printed on every ticket so we don’t need your all-mighty brainpower to look out for us. No one thinks of the lottery as a lifetime investment plan, despite what the Mega Millions website shows. Their job is to sell tickets. But it is fun to think about once in a while. And the truth is, someone, somewhere is going to win. Don’t want to be that person? Don’t buy a ticket.

    What the lottery is is a corporation that gives all its profits back to the state. Schools, environmental programs, economic development all benefit from lottery money. I wish more of the money I spent at the store went to those things instead of some profit-driven corporation.

    What’s obscene is your condescending attitude about how people choose to spend their money.

    But by all means, feel free to publish the addresses of the neighborhood stripper poles. That’s just harmless entertainment, right?

    Fri, August 28 at 8:49 am
  2. Wallyhood said,

    @Chuck You’re being very rude. Please remember: if you live in Wallingford, we’re neighbors. Would you talk to me that way if you and I were standing in front of one of our houses?

    As to your points, I disagree: people are notoriously bad at understanding the odds. There’s truckloads of research that show that when faced with numerical decisions, people make decisions that are not in their best interest, and gambling is its own kettle of fish. There is recent research showing that human reaction to gambling is a physical rush that can be addictive in the same way cocaine is.

    And yes, being poor CAN make you bad at math. There is a well documented relationship between socio-economic class and education. If you asked the typical person on welfare to run through the numbers I just did, or to tell you whether buying that lottery ticket was a “good bet”, I’ll BET you they would say yes.

    As I addressed in the post, the “if you don’t buy into it, don’t buy a ticket” line is flawed as well: the ticket buyers who can’t afford it later show up at the soup kitchens and welfare lines that my taxes and my charitable donations pay for. So what they do DOES impact me and others who don’t play.

    If you want to play for fun and you can afford it, be my guest. I’m free to believe and to suggest to others that it’s a bad decision.

    In the future, please feel free to disagree with me POLITELY. Calling my posts BS, crap and condescending is unnecessary. If you can’t be polite, I’d ask that you simply stop reading and commenting on this blog.

    As for the “addresses of stripper poles” comment, if you’ll read the post, you’ll see that I corrected my error as soon as it was pointed out to me and apologized publicly. Would you do the same?

    Fri, August 28 at 9:35 am
  3. Chris W. said,

    I like to get Scratch Offs in my Christmas stocking every year. I usually just win enough to buy 2 more tickets, which lets me buy 2 more tickets, and then I win enough to buy 2 more tickets…

    I support lotto in theory, but do realize that poorer folks are more likely to buy the tix. However, I do hope that we’re all making decisions like, “Do I buy a lotto ticket, or that six pack of soda for the game?” Instead of “Do I buy a lotto ticket, or milk for the baby?”

    One can hope!

    Arguments against the lotto always feel like a slippery slope to me — ie. if alcoholics are more likely to buy alcohol, then we won’t sell alcohol to anyone. If obese people are more likely to buy donuts, we shouldn’t sell donuts, etc.

    Jordan, it’s nice to see you asking for polite exchanges on your blog. I see so many nasty comments on blogs & news sites — and enjoy that Wallyhood is generally quite free of them.

    chris

    Fri, August 28 at 11:05 am
  4. Chuck said,

    Wallyhood, I do and I would. Of course then my intended more jocular tone would be obvious in person. :) I absolutely apologize for the harsh tenor of my response, it was more intended as part of a spirited debate than a personal attack. And on second reading I understand your frustration. One of the reasons I’ve stopped reading Slog and PI Soundoff is the mean spiritedness of the comments and I’m embarrassed to have perpetuated that here. Again, I sincerely apologize.

    I wrote condescending because that’s the way your post felt to me. As if you were saying “hey dummy, don’t buy lottery tickets. You obviously don’t know what’s good for you so let me tell what you should do because I’m good at math.” That may not have been what you were intending, but that’s honestly how I interpreted it. And I always get a bit of “don’t tell me what to do” ire raised for things like that. :)

    But on the subject at hand: I would like to see a study that looks at the audiences and consequences of different forms of gambling. I don’t think they’re at all parallel. Casino gambling is quite different than Lottery playing. I don’t see people embezzling from employers, mortgaging houses or neglecting essentials to buy Mega Millions tickets. By virtue of the fact that the instant gratification has been removed, the cocaine-like thrill of playing is largely absent. Blackjack it is not.
    Plus, like I said earlier, someone is going to win. Yes, the odds are longer. But my $1 very well could turn into millions. Shared and taxed millions, but millions just the same. That’s not the case with slots or blackjack where we are all virtually guaranteed to lose.

    And if i win tonight, beers at the Pacific Inn are on me to make up for my boorish behavior. :)

    chuck

    Fri, August 28 at 11:46 am
  5. Kerrizor said,

    Wait, its a dessert topping AND a floor cleaner!

    Chuck and W’hood are both right, but Chuck made the point I was going to make – the opportunity cost/relative value of a dollar is eclipsed by winning “only” $45M.. its still a sucker bet, because you ARE going to to lose that dollar, but the relative value of a single dollar is next to nothing for most people.

    …except the people you specifically refer to, those who tend to dump $10, $20, $50 a week into lottery tickets.

    So Mom, Dad, stop fighting! :)

    Fri, August 28 at 11:52 am
  6. Bill said,

    Speaking of Mom & Dad, my parents used to buy me scratch off tickets when I was a kid. I won a thousand bucks on one, which was like the “big one” to me at that age. While I’m aware my parents didn’t have the best parenting skills, I still think it’s fun to play. It didn’t turn me into any kind of lotto junkie.

    Nowadays, I only play when there is a big prize like right now. While it may be an unfair tax on people who are bad at math, I still enjoy the fun of the game.

    Fri, August 28 at 1:02 pm
  7. Andrew said,

    Thank you for taking the time to ruin fun. Maybe your next article can prove how “Star Wars” could never happen in real life.

    Fri, August 28 at 1:36 pm
  8. Wallyhood said,

    @Chuck Thank you, your follow-up is much appreciated and turned my day around. I always make fun of smiley-faces, but I guess they are helpful in helping you know when someone is being playful argumentative or really is angry.

    I’d be interested in chatting with someone from a Gambler’s Anonymous group to see how much the lottery plays in. I read all the time about people buying 50 / 100 tickets per week (and people for whom that’s a lot of money), but don’t have data on hand to say how prevalent it is.

    @Andrew There’s no sound in space, so when you hear the explosions from the other ships, that’s totally fake.

    Fri, August 28 at 1:50 pm
  9. TroyJMorris said,

    Don’t forget what it funds.

    One less drip for me equals some school funding.

    Fri, August 28 at 2:10 pm
  10. TroyJMorris said,

    Also, they tend to do a lot to educate folks with a gambling addiction, which is where people get into trouble. So suggesting these folks go to Vegas, snide or sarcastic suggestion alike, is just as troubling.

    Most state’s, including our own, use the funds to pay for crucial civil and social services, which also throw your “my tax dollars/soup kitchen” rude idea out the window.

    Look, the odds are bad. It’s why they call it gambling. You’re not better off gambling one way or another. It’s always a gamble. But to dare suggest that it’s a drain on our society without looking much past the odds is superficial.

    Fri, August 28 at 2:16 pm
  11. TroyJMorris said,

    Oh, and if you don’t want people to be rude, don’t make your posts rude. It encourages those responses.

    Golden rule and all that.

    If you think I was rude, I apologize. I’m just a little curt today. You took, what is to most, a recreational activity that serves a good purpose and falsely represented it for a rant and then asked for civil discourse.

    Fri, August 28 at 2:18 pm
  12. Frank said,

    “You’re much better off going to Las Vegas and pulling the one-armed bandit. There, they’ll give you anywhere from 80 to 90 cents on the dollar, compared to the lottery’s 25.”

    Nope. You took taxes out of your $204 to get to 25 cents to the dollar number.
    You can’t conveniently leave that out of your Vegas equation.
    This also forgets the lower wins people can claim from matching less that all of the numbers, which IS included in the Vegas payback numbers
    (Prize money is apparently 60.4% of lottery proceeds. Not great, but on par with some casino bets http://www.walottery.com/sections/Education/Default.aspx?Page=MoneyGoes)

    So let’s not pretend this game of chance is that much worse than going to Tulalip.

    Also to be clear. People gain a real utility from the hope generated by the lottery. The “dream” that you seem to devalue holds an actual value to many people no different from the value someone might gain from the deliciousness of a hamburger at Dick’s or going to a movie at the Guild 45th.

    Someone paying $10 for a fancy chocolate bar instead of a 75 cent Hershey’s is no different than someone spending $1 or $5 or even $10 on the lottery if they derive happiness from that.

    I feel like you assume that people have no idea how bad their chances are, and I’d agree that many underestimate the long odds of the lottery. But its condescending to say that no poor people don’t know what their doing and it’s a huge leap to imply that playing the lottery leads to “foreclosures, welfare, food stamps, and medicare”

    (it probably results in eating hamburger helper instead of a steak for dinner, which while not particularly healthy isn’t going to bring about the fall of society)

    Fri, August 28 at 2:40 pm
  13. joe momma said,

    someone could take the fun out of a BJ.

    this blog entry doesn’t really shock me though.

    Fri, August 28 at 2:50 pm
  14. Amber said,

    A friend sent me a link to this site, mentioning that yard sales are posted, or kept track of for all in Wallingford who are interested. I thought I’d pass along that there will be a yard sale this Saturday from 11am-6pm & Sunday 10am-4pm (8/29 & 8/30) at 1000 N 49th St. Thank you!

    Fri, August 28 at 2:58 pm
  15. Wallyhood said,

    @Troy / @Frank I don’t believe the “the money goes to a good cause” line. My assumption (unproven) is that the legislature knows how much to expect from lotteries and then allocates the rest of the money accordingly. That is, they say “we need to spend x on schools, but we know we’re getting y from the lottery, so let’s just allocate x-y from the general fund, and spend y on something else”. I’d like to see the numbers that show that overall spending on schools went up after the advent of a lottery (I’d also like to see numbers that support my supposition).

    @Troy it’s not a rant. At the beginning, I call it a “screed” (“a long speech or piece of writing, typically one regarded as tedious.”). I like that word better.

    @Frank You’re right, I left out taxes on Vegas. I considered leaving it in, but decided that most people don’t declare their slot machine winnings. For complete apples-to-apples, I should have included it.

    Also, you’re right that there is utility in being able to “dream”.

    All: Here’s a study I found on lottery gambling and gambling addiction: http://bit.ly/lottery-gambling. If you Google “Lottery Gambling Addiction” there are many more. From my cursory read, it looks like lottery gambling is not as serious as horse racing, slot machines, etc., but there are a significant number of people in treatment for it.

    Fri, August 28 at 3:49 pm
  16. Domenic said,

    As an instructor once told me, “The lottery is a tax on people who can’t do math.”

    Fri, August 28 at 4:02 pm
  17. Cindy Y said,

    I don’t play the lottery (not for any particular reason), but have joined in on some low-stakes poker or slot machine action from time to time. I know I’m always going to lose, but as long as I cap my losses, I can at least tell myself that it was no more expensive than a typical night out at, say, Moon Temple. It’s like paying for a few hours of entertainment! Ah, rationalization….

    BTW, does anyone remember that story a while back about a NYC doorman who won the lottery? This all reminds me of that story, which, if I recall, was actually quite sad. Like, he had been spending more than his annual salary on the lottery, much to the consternation of his wife. I guess it paid off in the end, but those habits don’t bode well for keeping his winnings for more than a few years. Can’t find the story anymore, so my details might be WAY off.

    Fri, August 28 at 4:42 pm
  18. Chuck said,

    Well, surprisingly enough, I didn’t win. You guys are on your own for beers at the PI. Next time. There’s always next time…

    Sat, August 29 at 4:45 pm
  19. TroyJMorris said,

    Well, someone won. And you do have a point, about allocations from the general fund. Currently, the majority of funds do go to education, but it is an x-y situation. So instead of MORE money going to education, the same amount is and other funds are placed elsewhere.

    “Profit from all Lottery games must benefit education up to the level of $102 million annually. Once the $102 million contribution level for education has been reached, any additional net revenues from Mega Millions will benefit the General Fund while other Lottery games continue to benefit education”

    Unfortunately, some legislative body decided certain scratch games should be used to pay for our stadiums… so super fucking great.

    Sat, August 29 at 7:16 pm

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