Wednesday, February 3, 2016

The Biggest Scam in America?

That’s right, I consider it to be the biggest scam in America. It’s the greatest (and possibly only) brainchild of the U.S. Government. It’s so messed up that people actually give their money to the government. It’s so insane that the word unethical wouldn’t begin to describe it. It’s the Powerball lottery.

Sure, the winners wouldn’t describe it that way. And this year had an especially delightful draw with the total sum of the Powerball lottery reaching 1.6 billion dollars. It made headlines. It made more people more excited, they paid more of their hard-earned money, the value increased and that is how the number 1.6 billion came about.

I want to begin my explanation of why the Powerball lottery is the greatest scam in America with this simple but powerful rule in gambling: the house always wins. So if your one of the people who beat the odds of 1-292 million of winning anything in the lottery, then congrats to you. But sorry, even if you won the jackpot, the government still gets to keep most of the money (which doesn’t really matter to you since you get a few hundred million to do whatever you want). So how does Uncle Sam get a majority of the lottery money? Taxes. If you take the cash out option, the government will keep up to 40 percent of the money and give you the rest. Then that prize money becomes taxable, and of course you’re now a millionaire so you are in the top tax bracket, 39.6 percent. So the government takes that 39.6 percent of your money and your finally free to do whatever you want with it. Oh, I forgot, you also have to pay the state local taxes if you live in one of the 44 states that collect it, which is anywhere between 3 and 9 percent. So not bad. And finally the money is all yours…unless you want to give some money to your friends of family. Then there’s the lovely gift tax waiting for you.

The other option of collecting you prize money is through annual payments over 29 years. In this case you will actually end up with a greater share of the total lottery, as the government invests the money and gives you bigger payouts out of the profits. Of course, every payout you receive is taxable at the 39.6 percent tax rate, but at the end of the day (or more like 30th year) you will have received a bigger chunk of the lottery as compared to the cash out option. Unless of course you die. Then the annual payouts become a part of your estate, which is inherited by whoever is on the will. But then you have to pay a federal estate tax, which could be upwards of a $100 million based on the totally sum of the annual payouts you have been receiving. And remember, your annual payouts (at least for this year, which is the highest jackpot ever) are around $22 million. So how do you think your poor family is going to pay that estate tax? Please don’t put any loved ones on that will if they don’t have a LOT of money to pay the estate tax on your annuity from the lottery.

That aside, lets talk about the morality of the Powerball lottery. The government tries to undermine their own genius by using the money to fund state education, environmental protection, and other supposedly important programs. But...what money? About 60 percent of the money is reserved for potential winners, retailers get 5-6% commission, and another 9 percent goes toward advertising and administrative costs. So we are left with a fraction of the total sum which is then divided between all the programs. Here’s what abcnews has to say about the matter: “The lottery money does go to the intended cause. However, instead of adding to the funds for those programs, legislators factor in the lottery revenue and allocate less government money to the program budgets…Given a few years, a state would have spent more on education without a lottery…says one lottery critic, Patrick Pierce, a political scientist at St. Mary's College in Indiana, who has analyzed the impact of lotteries.”

If the government really wanted to spend more money or raise more money for education or environmental protection or what not, then let them simply tax the people! Using gambling to pay instead? “Critics argue that, aside from being an inefficient way to raise money, paying for government services with lottery sales also shifts a larger portion of the overall tax burden to those who can least afford it. It’s a very regressive tax," said Lucy Dadayan, a senior policy analyst at the Rockefeller Institute of Government. “And any time a government relies on a regressive tax it's not the best policy option. But it’s easier for state officials to promote gambling rather than to increase income taxes or sales taxes-NBCNews.”

And this leads me to my final point: the Powerball lottery is just a tax system to make the lowest income people in the U.S. (who pay the lowest taxes) give more than their fair share of taxes to the government. According to Business Insider: “The people who can least afford it are throwing away on average 47 cents on the dollar every time they buy a ticket. And the government, which relies increasingly on the lottery for funding, goes out of its way to tell them it is a good idea.” The Powerball lottery gives poor people a false hope that they will win something big, and then lets those people give them money to do whatever it is they want to do with it. The sad truth is that most families and individuals in the United States who participate in the Powerball lottery are financially uneducated, and the government preys on those people in the hopes of making a fat profit. I believe the Powerball lottery is an unnecessary evil and something the world would be a better place without. Get rid of the Powerball lottery, teach underprivileged people how to save and grow money, and we will have a much better economy, I can guarantee you that.

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