The Eternal Question

We've all thought about this Question at various points in our lives. In this particular instance, I'm not talking about life, God, extraterrestrials, or ancestors. In this case...

What would you do if you won $290 million dollars in a lottery?

After the taxation, your cut would be approximately $90 million, still more green than a square mile of the Amazon rain forest. The Mega Millions jackpot was among the largest in history Friday.

I posed this question among friends the other day. And, sure, we've all had our "materialistic" answers: The beachfront property... the Mercedes-Benz... the in-ground pool... the biggest wide-screen TV known to man. But what I found is that most people essentially want instantaneous wealth in order to buy the most intangible of things: Time and freedom. Despite the laundry list of fancy gadgets and gizmos we'd like to own, it is the essence of finite time that I believe drives us to buy a ticket with a 135-million-to-one odds we'll win the whole enchilada.

Without having to work 5 (or 6) days per week, we're open to explore new opportunities, spend more time with family and friends, partake in a list of hobbies we seem to have little precious time to enjoy, see nature, travel to places large and small, read, write, paint, draw.

While cynics may see lottery players as 'greedy', I see this as a justifiable whim. Even at outlandish odds, people will take the chance at obtaining the kind of freedom time provides. And it seems inherent in everyone I chatted to last week. This doesn't necessarily imply that money automatically buys love (unless your kind of "love" is in rural Nevada) or happiness. Get by all the different store-bought items at the surface, everyone just loves the sense of pure individualized freedom that the winnings would bring.

When asked what he'd do with all this newfound cash, had he won it, one Lowell, Massachusetts man simply said he'd "disappear for a while". Right on.

Me... I rolled the dice as well. But I'll be back at my job in 12 hours.

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I too would use the money to

I too would use the money to buy freedom, but not of the sort you speak.

I would rather take most of that money and buy as much land as I can, preferably an island or archipelago, and start my country, which would be a libertarian paradise.

If 290 million wasn't enough to do that, then, well, I guess I'd be left with using it to start a business so that in time I would be able to have made enough to persue my dream.

"start my country" should

"start my country" should have read "start my own country". Sorry.

What would I do? I would

What would I do?

I would tell the rotten creeps to keep their ninety million, because the fruit of a contract witheld by two-thirds is worse than worthless. And then, I would be happy to step out in front of their smiley-face cameras and tell the whole world what a fraud they really are.

Believe it or not.

"After the taxation, your

"After the taxation, your cut would be approximately $90 million"

So it's like income tax only instead of paying 30-38% of your income to tax you are paying 70%.
The question then becomes would you accept a prize of 290 million dollars if it meant giving 200 million to the same government that set up the lottery and outlawed gambling and private lotteries for everyone else. My answer is no, I wouldn't.

Now supposing I could just instantly inherit 290 million tax free dollars (or even 90 million) I can think of many things I would do with it. The first would be to hire an accountant, and I wouldn't go for the buy an island thing. At least not immediately. I think I would rather buy a mountain if I could pull it off. But that would also have to wait. I suppose I ultimately would use it to afford more time to do the things I want, but I typically have plenty of time to do things. What I lack is capital. Capital to invest in things I want to invest in, like starting a business. I think I would start something that would otherwise be too risky of a venture to invest in (more money also means you can afford bigger risks). Starting an art gallery, funding an independent film, starting my own music studio etc.

Capital can be used for much more than hobbies and vacations.

"What would I do? I would

"What would I do?

I would tell the rotten creeps to keep their ninety million..."

"The question then becomes would you accept a prize of 290 million dollars if it meant giving 200 million to the same government that set up the lottery and outlawed gambling and private lotteries for everyone else. My answer is no, I wouldn?t."

No offense, but I don't believe either one of you. Not even for a second. ;-)

Personally, I see a huge difference between tax on income and tax on a voluntary lottery.

Two chicks at once, man.

Two chicks at once, man.

Doug, the whole enterprise

Doug, the whole enterprise seems fraudulent. Everyone advertises the "$290 million" aspect of it, but you don't get that. You get an amount shockingly lower that is simply dismissed on the grounds that it's still a large amount left over.

Think about that and then compare what people say about taxing the rich.

After the taxation, your cut

After the taxation, your cut would be approximately $90 million, [...]

Actually I'm not sure that's quite accurate. The game in question allows you to take an annuity -- the supposed $290 mil -- or a lump-sum payment. The annuity is generally paid $50K/mil over 20 years, the lump-sum is obviously quite a lot less. Either way the tax burden would be horrendous, but I suspect the 90 mil is based on the lump-sum value minus taxes and the annuity minus taxes would be substantially more.

Of course only a fool would take the annuity, but technically I suspect the annuity payout minus taxes would be a lot closer to 290 mil, at least on paper.


My friends and I refer to

My friends and I refer to lottery-type windfall money as "stupid money"- that is, money above and beyond what you need to survive & prosper you can be stupid with.

Pretty much most of my friends and I also agree that after taking care of yourself (paying off debts, buying house, setting up finances, etc), the next thing I'd do with the Stupid money is go and buy my family, then close friends houses (pay off mortgages, etc) or pay off car loans, whatever; get them out of debt and into some capital. With the money left over after that, I'd do like Rainbough suggested- capitalize some speculative ventures of my own (or, more likely, or other people; I kind of like being the guy who funds things and helps other people get things done. I'm lazy like that (heh)). The best thing about having a lot of money is that you get the opportunity to start helping other folk and undertaking new enterprises without worrying so much- that is, the risk of any given enterprise becomes much much lower when you've got stupid money.

Charles, Appreciate the


Appreciate the comments, but I'm still hesitant to compare lottery taxes with income & property taxes.

The lottery is a voluntary contract, "signed" by you when you purchase a ticket. The only way anyone will receive your $1 is if you decide to give it to them.

Obviously, the opposite is true for a tax levied on your income. First, it's involuntary, of course. Secondly, income taxes directly strike at the heart of motivation to succeed. Because a large bulk of a Powerball jackpot is taxed doesn't affect my day-to-day finances or work ethic.

You don't have to believe

You don't have to believe it, Doug.

But I know me, and you don't.

I know. I was merely

I know. I was merely ribbing you guys.

But I do find it unusual that you would just tell the government to keep the remaining $90 million to prove a point, as opposed to taking it and distribute it to your favorite charities, or your relatives, or a policy think-tank (such as Cato, von Mises, etc), and so on. I'm not saying it's right or wrong or anything like that... Just unusual.

I'd build the

I'd build the state-of-the-art roadracing facility I've been seeing in my head for the past decade. $90M would just about cover everything.

After searching several

After searching several references to lottery tax withholdings, what I see is 30-32% withheld, usually 25% for federal, 8% for state. Not sure where you got 70% from

John Crawford

John, To be honest, I'm not


To be honest, I'm not sure exactly how it works, but lottery winnings take a 'double hit'.

I was off in my guess, though. It turns out that the final total would be $120 million:

I went searching, and choosing the lump sum knocks you down from $294 million (the official final tally) to $165 million after the first grab. After a tax grab on that, your takehome loot is down to $120, or about 40% of the original jackpot. I'm not sure where Step #1 and #2 of each grab goes to.

FWIW, the winner of this lottery has not come forward yet.

That of course is another

That of course is another problem. You instantly acquire thousands of friends and relatives across the country. Unless there is a way to accept the money quietly and anonymously, I'm not sure if I could deal with the hucksters and quacks trying to get a piece of my pie.

I understand the differences between income taxation and taxation of something you voluntarily participated in; I wasn't equating them. It's still got a hefty stench of the state on it.

This may sound strange, but

This may sound strange, but I'm not sure I'd want to win $290 million in a lottery. I'd miss the sense of pride I get form having provided for myself through my own labor and I'd be forced to spend the rest of my life plagued by doubt over whether I really deserved anything I had.

In what's possibly the only

In what's possibly the only semi-sensible thing Rush Limbaugh has ever said, he once noted that the lottery is a tax on stupid people.

Of course, he was using this as a point against the lottery, and a voluntary tax is oxymoronic.

It's absurd on the face of it: unless the end payout minus taxes and the lump sum penalty (do *you* trust that that moolah's gonna be there in two decades? No? Good.) is >= the odds, it's a losing proposition to buy a ticket.

That doesn't even take into account the almost certain fact that that dollar invested at *the comic book store* will pay out far more than that dollar invested in a lottery ticket. Heck, investing that dollar in a Coke machine will pay out a Coke, 99.99+% of the time. *My* lottery odds change by an effective zero, given that I don't buy a ticket.

And it pays out 100%.

"No offense, but I don?t

"No offense, but I don?t believe either one of you. Not even for a second. ;-)"

It's a far easier choice than you think, simply because I wouldn't play to begin with for the mere fact that if I play at all I am making a donation to the government regardless of whether or not I win. Yes it's voluntary and I agree that that is very different from income taxation. The relevant question for me is what is the money going to pay for? If the money is going to fund an entrenched bureaucracy and other halmarks of the state (that necessarily make the world a worse place to live) then I do not want to pay it voluntariy or otherwise.

Winning 90 million will not make me feel better if 200 million is going to pay to deport peaceful immigrants, pay the salaries of incompent teachers, or force kids to attend failing schools etc.

Of course there is no point in buying the ticket to begin with if you are not going to accept the money. I wouldn't buy a ticket and then not accept the money to make a point, because a portion of my 1 dollar would get added to the tax-pot regardless of whether I was "making a point" or not.

The point is that the size of the jackpot in a state lottery would never ever tempt me to buy a ticket to begin with. No matter what my odds of winning were.