SOOPOO
SOOPOO
Joined: Aug 8, 2010
  • Threads: 111
  • Posts: 7910
Thanks for this post from:
Mission146
May 7th, 2021 at 11:05:56 AM permalink
Quote: Mission146

I guess it's not even so much, "Agree to Disagree," as it is a matter of only the lottery would know. I think taxable winnings for lottery games start at $600, but in order to figure all of that out, I would have to know how much is in the prize pool of a set of Instant Tickets (for one example) and then how much of that return is over $600 and what the effective tax rate of all of that would be.

Not only does the lottery NOT list sales/prizes for every type of Instant Ticket, a few lotteries don't even separate Instant Ticket prizes from those of drawing tickets in their Annual Reports. In fact, Maine was the only state to even separate Instant Ticket Sales/Prizes by Instant Ticket denominations---no other state even did that much.

So, in order to report it the way you're suggesting would be better (and I do not totally disagree with you) would take a nearly impossible amount of research. For some states, I'd literally have to physically go to the state and look at the back of some of the Instant Tickets to figure out the overall return and return distributions.

I do take your point on the JoB example; I really do, but it would require one to look at potential tax obligations as a part of the game rather than something that occurs outside of the game. It's also the type of caveat you would then have to do for every game for which some taxable jackpot is even possible. I guess what I am trying to say is that nobody determines the House Edge of games factoring those things in. Even slot machine PAR Sheets don't pay any attention to potential tax obligations.

ADDED: It's kind of like how potential employers list what the salary for a position is, not how much you would expect to receive after taxes.



I have rethunk it... and I think it is a BIG error not to include the tax effects. Heck, the POINT of your article is to show how bad the return is on lotteries. For the biggest payouts you get 1/3 less....

You say ‘outside the game’. If you are paying an ‘ante’ to play BJ somewhere, do you not factor that in since it is ‘outside the game’? I hope not!

If there is an opportunity somewhere to make a $1000 bet with an EV of $1500, but it costs $600 to get there.... etc.....
Mission146
Mission146
Joined: May 15, 2012
  • Threads: 127
  • Posts: 13462
May 7th, 2021 at 11:20:38 AM permalink
Quote: SOOPOO

I have rethunk it... and I think it is a BIG error not to include the tax effects. Heck, the POINT of your article is to show how bad the return is on lotteries. For the biggest payouts you get 1/3 less....

You say ‘outside the game’. If you are paying an ‘ante’ to play BJ somewhere, do you not factor that in since it is ‘outside the game’? I hope not!

If there is an opportunity somewhere to make a $1000 bet with an EV of $1500, but it costs $600 to get there.... etc.....



Antes become a part of the game, if that is the case. You may not play the game unless you pay the ante, but with the lottery, you're only taxed if you win a taxable jackpot amount.

In fairness, I guess I could have done that for the major drawing type games. Again, trying to figure out the tax implications on Instant Tickets, for every state lottery, would be borderline impossible.
Vultures can't be choosers.
billryan
billryan
Joined: Nov 2, 2009
  • Threads: 179
  • Posts: 10712
Thanks for this post from:
Mission146
May 7th, 2021 at 11:30:30 AM permalink
How do you put a price on a dream? If grandma drops a few bucks and spends the days before the drawing dreaming of getting her family out of poverty, is that such a bad thing?
Mission146
Mission146
Joined: May 15, 2012
  • Threads: 127
  • Posts: 13462
May 7th, 2021 at 11:33:00 AM permalink
Quote: billryan

How do you put a price on a dream? If grandma drops a few bucks and spends the days before the drawing dreaming of getting her family out of poverty, is that such a bad thing?



Probably not. The expected returns of games don't have a way for me to factor, "Dream Value," into the percentage, though.
Vultures can't be choosers.
SOOPOO
SOOPOO
Joined: Aug 8, 2010
  • Threads: 111
  • Posts: 7910
Thanks for this post from:
Mission146
May 7th, 2021 at 11:38:29 AM permalink
Quote: billryan

How do you put a price on a dream? If grandma drops a few bucks and spends the days before the drawing dreaming of getting her family out of poverty, is that such a bad thing?



Grandma? How about me!? I (rarely) will buy a dream for $2. Wifey will drop a $20 when Powerball or MegaMillions are high 9 figures.
Mission146
Mission146
Joined: May 15, 2012
  • Threads: 127
  • Posts: 13462
May 7th, 2021 at 11:59:12 AM permalink
Quote: SOOPOO

Grandma? How about me!? I (rarely) will buy a dream for $2. Wifey will drop a $20 when Powerball or MegaMillions are high 9 figures.



You should mention the potential tax obligations to her. JK

Although, mentioning the increased probability that she ends up sharing the jackpot might be worthwhile. Also, what could she do with $400M that she couldn't do with $50M? She must dream REALLY big!
Vultures can't be choosers.
ThatDonGuy
ThatDonGuy 
Joined: Jun 22, 2011
  • Threads: 100
  • Posts: 4778
Thanks for this post from:
Mission146
May 7th, 2021 at 12:04:39 PM permalink
Quote: SOOPOO

. I read some, but not all, of your article. Forgive me if I missed it but..... isn’t the RTP actually MUCH worse than you calculate once real life tax consequences are considered. The overwhelming number of losing tickets sold do not qualify for a tax deduction, while at least the big jackpots are taxed at both the state and federal levels.


I don't know about other states, but MegaMillions and Powerball wins in California are not subject to California state tax, presumably assuming you bought the ticket in California.

Also, the W-2G reporting minimum for a lottery is, in fact, $600, assuming that is at least 300 times the cost of the ticket.
Mission146
Mission146
Joined: May 15, 2012
  • Threads: 127
  • Posts: 13462
May 7th, 2021 at 12:20:40 PM permalink
Quote: ThatDonGuy

I don't know about other states, but MegaMillions and Powerball wins in California are not subject to California state tax, presumably assuming you bought the ticket in California.

Also, the W-2G reporting minimum for a lottery is, in fact, $600, assuming that is at least 300 times the cost of the ticket.



Thanks for pointing that out, ThatDonGuy!

It would appear that a problem that I mentioned earlier is how this would work for Instant Tickets, because I would have to know the return distribution for, literally, every Instant Ticket game in the entire country in order to offer a percentage that factors in tax obligations.

It now appears that there is a problem with drawing tickets---I'd have to go look at the relevant tax laws for each individual state. Of course, that would mean that something like Powerball, "Returns," more in one state than another. I also know that Florida has no personal income tax, but I don't know if that extends to lottery winnings.

Either way, I'd still have to research applicable tax laws and percentages for each individual state to arrive at an, "Expected return," that literally no other gambling publication calculates that way---they just look at the games.

In fairness to SOOPOO, it would be more accurate, but it's also an impractical task.
Vultures can't be choosers.
billryan
billryan
Joined: Nov 2, 2009
  • Threads: 179
  • Posts: 10712
Thanks for this post from:
Mission146
May 7th, 2021 at 12:21:52 PM permalink
Quote: Mission146

Probably not. The expected returns of games don't have a way for me to factor, "Dream Value," into the percentage, though.



When the NY State lottery was fairly new and the drawings were televised, my Uncle would always give us a choice between a fifty cent lottery ticket or a dollar. I think the top prize back then was $50,000. I always took the ticket and would make plans for my winnings. My cousins would buy a bag of chips and a soda.
Mission146
Mission146
Joined: May 15, 2012
  • Threads: 127
  • Posts: 13462
May 7th, 2021 at 12:30:17 PM permalink
Quote: billryan

When the NY State lottery was fairly new and the drawings were televised, my Uncle would always give us a choice between a fifty cent lottery ticket or a dollar. I think the top prize back then was $50,000. I always took the ticket and would make plans for my winnings. My cousins would buy a bag of chips and a soda.



Your cousins ended the day with a decent snack and you ended the day with plans that would have to find some other way to come to fruition.

I couldn't even think of what I would do with a Powerball jackpot. I can't even conceive of having that much money. The only thing I have is a certain amount in my head where I could be as conservative with the money as possible so I'd never have to do anything again.

In any case, your choice still saved your Uncle some amount of money over time.
Vultures can't be choosers.

  • Jump to: