Don't be a Lotto fool
Today I bought a lottery ticket. No, not that lottery ticket. I bought a ticket in my own personal Walter Bussy Lottery, I took $2 and put it into my savings account. I don't want to lecture on the immorality of state-supported gambling, regressive public revenue schemes and of course, the whole ineffectuality of using a lottery to try to increase education spending. I'd rather just point out that as far as getting wealthy, your best bet is saving and using that miracle - compound interest.
Why don't I like the lottery, not policy-wise but for me personally. Here's the problem. I'm not a big fan of somebody else getting rich at my expense. And playing the lottery is nothing more than ignoring the near certainty that your money will end up in someone else's hands while deluding yourself regarding the near-impossibility that that someone will be you. Don't believe me, ask the NC lottery commission. The best you can hope for is a 1 in 3.75 chances at winning. Basically, your up against 2.75 other people. Maybe Kobe Bryant doesn't end up passing up that shot, but arcbender shares the ball when the odds are that bad.
And it gets worse. If you win the lottery, which is supposed to help us pay for education without increasing taxes, guess what happens - YOU PAY TAXES on your winnings! So say you spend $2 a day buying lotto tickets over six months. Your looking at far worse than break even odds, and what little you get back, that's getting taxed too. Really people, this is spending money, to get back less than you spend, and be taxed to boot.
I know, I know - what about the thrill!?? It's the sport of it all that's attractive, right. It's the fact that you just might hit the big one. Sure you'd pay a nice chunk in taxes, but you have that chance of making it big.
To this I say, "you like the idea of funding government while taxing people who make it big? Great, let me explain how a progressive income tax works. It's called you work, you succeed and make it rich, you end up paying taxes, and afterwords, you're still rich." Sure, the rich complain about higher marginal rates, but no person has ever been seen jumping for joy, or relaxing by their personal indoor pool while they paid a sales tax (frequently the only acceptable tax for increasing).
But I said I wouldn't do that. Okay, back to the lottery ticket. It's paying for the education of that cute little braces-wearing girl on the Lottery Commission's website isn't it? (What they couldn't give her a puppy to hold?) Where does that dollar go? Well, try this break down (from the NC Public Schools Forum) of your lottery dollar on for size. The half going to winners, has got all the pepperoni on it, and guess what, you'll be lucky to get the crust. For the link challenged, here's the numbers with my $ figure calculations added.
With that knowledge, I can't really bring myself to pop-in to a Citgo, grab myself a pack of Nabs and drop the money on the lottery. I'm not sure a pack of cigarrettes aren't a better deal. And I don't much relish the idea of anybody getting rich this way. Sure, the lottery winner makes for a nice photo - the beaming face of the average guy or gal that just hit the big one. But frankly, I don't care much what background somebody who wants to win the lottery has - as far as I'm concerned, they just better get themselves a job and stop expecting me to buy a lottery ticket so they can cease their morning commute. I'm willing to help my brothers and sisters out, I just doin't want my intelligence insulted along the way.
So here's my plan, put $2 a day into savings rather than spending that amount on lottery tickets. To simplify, you can, like me, use a program like Quicken to "hide" the $2 every day in a "savings goal" so the money looks like it's gone from your checking account in Quicken, and at the end of the month put the $60/62 into your Savings account. Saving $60/month would mean twice a year you would have accrued $300. Suppose you could put that amount into a 6-month CD, which right now earns around 4%. Six months later do the same thing.
At the end of 5 years, the $3600 you saved would have earned about $285 in interest for a total of $3885. May not sound like much, but remember, this is investing the money in an extremely conservative, rather liquid asset - you could earn more. Though likely you might need to pony up a bit more than just $360 to get started (most CDs require at least $500), using the additional $2 a day to beef up your current savings (really, you weren't thinking about reducing savings to buy lottery tickets were you?) makes sense. And over 10-20 years, with longer-term investmentments it really makes sense. And even if doesn't make a whole lot of cents, its a heck of a lot better than flushing the toilet with your money in the lottery.
And no, I'm not hoping to "burn the damn thing down" on the lottery. I fully expect it to make money, not money for North Carolina schools, but money for the North Carolina politicians who want to put off an honest discussion about North Carolina's finances. Still, if I make a few folks choose, by their own work and thrift to make a certain just $285 richer (and did I mention you might not have to pay taxes on it?) rather than making a certain other person rich, I'll sleep (not dying yet!!) a happy man.
Update PS - How bout this? You're more likely to die on your way to buy the ticket than to win big from it.
Why don't I like the lottery, not policy-wise but for me personally. Here's the problem. I'm not a big fan of somebody else getting rich at my expense. And playing the lottery is nothing more than ignoring the near certainty that your money will end up in someone else's hands while deluding yourself regarding the near-impossibility that that someone will be you. Don't believe me, ask the NC lottery commission. The best you can hope for is a 1 in 3.75 chances at winning. Basically, your up against 2.75 other people. Maybe Kobe Bryant doesn't end up passing up that shot, but arcbender shares the ball when the odds are that bad.
And it gets worse. If you win the lottery, which is supposed to help us pay for education without increasing taxes, guess what happens - YOU PAY TAXES on your winnings! So say you spend $2 a day buying lotto tickets over six months. Your looking at far worse than break even odds, and what little you get back, that's getting taxed too. Really people, this is spending money, to get back less than you spend, and be taxed to boot.
I know, I know - what about the thrill!?? It's the sport of it all that's attractive, right. It's the fact that you just might hit the big one. Sure you'd pay a nice chunk in taxes, but you have that chance of making it big.
To this I say, "you like the idea of funding government while taxing people who make it big? Great, let me explain how a progressive income tax works. It's called you work, you succeed and make it rich, you end up paying taxes, and afterwords, you're still rich." Sure, the rich complain about higher marginal rates, but no person has ever been seen jumping for joy, or relaxing by their personal indoor pool while they paid a sales tax (frequently the only acceptable tax for increasing).
But I said I wouldn't do that. Okay, back to the lottery ticket. It's paying for the education of that cute little braces-wearing girl on the Lottery Commission's website isn't it? (What they couldn't give her a puppy to hold?) Where does that dollar go? Well, try this break down (from the NC Public Schools Forum) of your lottery dollar on for size. The half going to winners, has got all the pepperoni on it, and guess what, you'll be lucky to get the crust. For the link challenged, here's the numbers with my $ figure calculations added.
- $0.50 – someone else’s winnings ($607 M)
- $0.15 – paying for Administrating a system that advertises to you to take your money so it can make other people rich ($182M)
- $0.02 – making sure there’s enough money in a system that makes other people rich ($21.25M)
- $0.13 – School construction ($161.5 M about 65% to counties based on enrollment, 35% to high-property tax counties)
- $0.03 – To scholarships – (according to the Lottery commission’s numbers, this would be $40.3 M)
- $0.17 – Class-size and More at-four – about $191.7 M
With that knowledge, I can't really bring myself to pop-in to a Citgo, grab myself a pack of Nabs and drop the money on the lottery. I'm not sure a pack of cigarrettes aren't a better deal. And I don't much relish the idea of anybody getting rich this way. Sure, the lottery winner makes for a nice photo - the beaming face of the average guy or gal that just hit the big one. But frankly, I don't care much what background somebody who wants to win the lottery has - as far as I'm concerned, they just better get themselves a job and stop expecting me to buy a lottery ticket so they can cease their morning commute. I'm willing to help my brothers and sisters out, I just doin't want my intelligence insulted along the way.
So here's my plan, put $2 a day into savings rather than spending that amount on lottery tickets. To simplify, you can, like me, use a program like Quicken to "hide" the $2 every day in a "savings goal" so the money looks like it's gone from your checking account in Quicken, and at the end of the month put the $60/62 into your Savings account. Saving $60/month would mean twice a year you would have accrued $300. Suppose you could put that amount into a 6-month CD, which right now earns around 4%. Six months later do the same thing.
At the end of 5 years, the $3600 you saved would have earned about $285 in interest for a total of $3885. May not sound like much, but remember, this is investing the money in an extremely conservative, rather liquid asset - you could earn more. Though likely you might need to pony up a bit more than just $360 to get started (most CDs require at least $500), using the additional $2 a day to beef up your current savings (really, you weren't thinking about reducing savings to buy lottery tickets were you?) makes sense. And over 10-20 years, with longer-term investmentments it really makes sense. And even if doesn't make a whole lot of cents, its a heck of a lot better than flushing the toilet with your money in the lottery.
And no, I'm not hoping to "burn the damn thing down" on the lottery. I fully expect it to make money, not money for North Carolina schools, but money for the North Carolina politicians who want to put off an honest discussion about North Carolina's finances. Still, if I make a few folks choose, by their own work and thrift to make a certain just $285 richer (and did I mention you might not have to pay taxes on it?) rather than making a certain other person rich, I'll sleep (not dying yet!!) a happy man.
Update PS - How bout this? You're more likely to die on your way to buy the ticket than to win big from it.
posted by SebbyMan at 8:34 AM
5 Comments:
Archbender, you should be commended for your personal savings initiative. No doubt that if everyone had your discipline and foresight, our country would see less instances of debt.
However, I take issue with your scathing criticism of the lottery. For instance, you say:
And it gets worse. If you win the lottery, which is supposed to help us pay for education without increasing taxes, guess what happens - YOU PAY TAXES on your winnings! So say you spend $2 a day buying lotto tickets over six months. Your looking at far worse than break even odds, and what little you get back, that's getting taxed too. Really people, this is spending money, to get back less than you spend, and be taxed to boot.
You seem to suggest that lottery winners paying taxes on their earnings is akin to a tax on the general citizenry....yet the spend the previous three paragraphs reminding people how little of a chance they have to win. Futher, somehow I doubt if any lottery winner is surprised to find that taxes must be paid on the jackpot. If that is supposed to be a deterrent, how about discretionary work or hours-based bonuses? These bonuses are heavily taxed, and because they are discretionary, they aren't a sure thing. In order to become eligible for the bonus, a worker has to stay at work late into the evenings and an occassional weekend. Though this might not be "paying" in a monetary sense, it is cutting into their free time and personal life. But those hours also mean more productivity to the employer and the economy, just as the $2 for a scratch-off means more dollars for education. Should the worker not work the extra hours because if a bonus is given, it will be heavily taxed?
- Cigarettes might be a better deal? I hope you're being sarcastic. I don't know what kind of "deal" you get by buying cigarettes, but at least when you buy a lottery ticket you have a chance of striking it big, albeit a small chance. As far as I know, purchasing a $2 lottery ticket has never been linked to throat cancer.
- Further, smoker prevalence is highest among those living below the poverty line with under 10 years of formal education, similar to the fact that a greater proportion of poor and minorities play the lottery compared to other subsets of the population. So should we also ban the sale of cigarettes?
- To ignore that some citizens of NC are playing the lottery is like promoting absintance as the sole sex education that should be given to teens. In fact, according to a N&O article:
South Carolina lottery officials estimate 12 percent of their annual sales come from North Carolina players -- about $100 million worth. Virginia officials say North Carolinians make up 7 to 10 percent of their ticket sales -- an estimated $91 million to $130 million.
Why shouldn't that money stay in our state and be used to educate our children?
- The proceeds of a state lottery can have significant results to individuals. For instance, in Georgia, in one year alone the state was able to provide $85,000 in scholarships going to 100,000 college seniors. The lottery stimulates the economy but creating jobs.
And finally...with the massive federal cuts in education, states are limited in their options of funding the vast number of programs their citizens expect them to provide. The NC lottery is a guaranteed revenue stream for education endevors, and can't be altered by future governors who might not care as much about early childhood education as the current one.
Stirring all the lumps out will make a tough muffin.
artemis31, I would have prefered you hook me up with free North Mississippi All-stars or Warren Zevon CDs, or perhaps some good Venison, but you chose to ignore my attempts to NOT get too deep into the myriad problems with the lottery as a policy matter. (Scathing? Really, that was tepid, not even a simmer - you could wash a baby's butt with that criticism.)
So, let me see if I can go Appollo on you and give you a little sunshine (not brotherly, but arcbenderly).
First off, I never said anything which would "suggest that lottery winners paying taxes is akin to a tax on general citizenry." And while I certainly did mean to imply that some folks will in fact be surprised to learn they are paying taxes (something I feel is a mortal certainty) what I really was hoping to point out was that your "winnings" (rare as they are) are not purely your winnings - some are going back to the state.
Yes, I do think this should be a deterrent. When you're spending money on a lottery ticket, your passing up other ways to earn, and perhaps more importantly save your money. That the potential payoff is going to be lessened by taxation, should be a factor.
Similarly, a "discretionary bonus" seeking employee should also consider the effect of taxation. But, though you seem to have been afflicted with a Texas sized fear of marginal rates (how did a Bush supporter find my site still in its blogging adolescence, I wonder), I'd tell that worker that no, marginal rates aren't that bad - they only seem heavier than your regular paycheck's tax hit because the bonus is on top of your earnings, and charged in your highest tax bracket.
as to the bullet points
-- Out of state lottery spending - $230 million dollars, ehh? In 2003, our state's Gross State Prodcut was around $314 B, so your talking about less than 0.7% or so spent outside of the state. It's not chump change, but the impact of gambling addiction shouldn't be ignored. Still, by citing these figures as an economic loss to the state, your implicitly (a) granting my general point that money spent on the lottery is a loss for the individual and/or (b) granting my lesser point that taxes erode earnings to a point approaching zero for most. This is the lottery, aren't some of those $230 M in tickets supposed to come back to lucky winners? In fact, the only way Virginia and South Carolina really know how many North Carolinians are playing is based on the number of North Carolina addresses they are sending checks to.
Also, yes, now we'll compete with Virginia, Georgia, TEnnesee and South Carolina for lottery dollars. And as a result, we'll compete as other states have, by more aggressive advertising, higher payouts and lower percentages going to programs.
If they were people streaming across the border to go to brothels, would we want those here too?
--- "Hope" Scholarships - scholarships for kids are great, but we should fund it with a more progressive revenue source. The joke about the Georgia program is that its the Honda Accord Scholarship, because most go to relatively well-off kids. If we're getting anything like that, I think it should be funded by fixing our lack of progressivity.
-- Cigarrettes - I've maybe bought three packs of cigarrettes in my life, and yes, if I had bought lottery tickets instead, I think I'd have been worse off. Doesn't mean I approve of smoking, but at the time, I wanted a cigarrette. And after I purchased them, I still had them to enjoy. After scratching off the lotto tickets, I'm betting I wouldn't have jack. And I bet I looked cool smoking the cigarrettes.
As for reducing cigarrette smoking, I'd love to. I don't think you can ban it though - ask Woody Harrelson, Bill Walton and ohh, I don't know George Bush, Al Gore or Bill Clinton. We can ban lotteries - in fact, that's what we used to do.
Arch, I'm not letting you get the last word on this one.
Interesting that you would assume that I was a republican, based on my comments here. But I kind of see it the other way around, your paternalistic zeal reminds me of that of an anti-abortion proponant or phohibition wife. But, I digress.
1. My reference to the amount of money that was going into other states, particularly South Carolina and Tennesse, does not implictly assume either of the points you make in your response, namely that lottery sales are a loss to the individual OR that taxes erode earnings to nil. My point was that North Carolinians were providing a rather substantial amount of money to the education systems of our neighbors. Why not keep that money within our borders and spend the money on our children? That has nothing to do with an individual's loss of money or winnings.
2. By statute, the money from the lottery can only go to scholarships for "needy" high school seniors; needy is defined as those individuals whose family cannot contribute more than $5,000 (using a federal formula). Hardly room their for a Honda Civic.
3. Smoking. When you purchase a lottery ticket you at least have a chance to win money. When you purchase cigarettes, you have the chance of getting throat cancer. In fact, while you continuely cite the long-shot odds of hitting the jackpot, the odds of getting cancer from smoking is much better.
And, although I can't be sure what I would have thought of you had I seen you smoking a cigarette, based on my general view of the things, I'm betting I would not have thought you "looked cool."
And lest you forget, we did try to ban alcohol for a short time. That worked out really well for us.
I'll admit I was wrong. In fact, $230 M spent on out of state lotteries is not .7% of our Annual Gross State Product. it's .07%. Less than 1/10th of a percent.
I grant that perhaps now those North Carolinians purchasing lotto tickets in other states might add a few dollars to the coffers of our government. But as I pointed out in my original post and in my response, the amount of "additional" funding is only significant if you believe, as our dear governor does, that our states revenue system can't find other, stable ways to pay for education. As the NC Justice Center's Budget & Tax outfit has shown, that's simply not the case.
The analogy to "bans" off intoxicants/carcinogens is off-base. We can ban a lottery, WE HAVE BANNED A LOTTERY. Letting in state-sanctioned gambling for the potential of repatriating 1/10th of 1% of our economy is nothing like telling joe six-pack he can't have a beer. And if you wan't to talk about moralistic bans that aren't effectively and hurt the state revenue your inviting a big elephant into the room ..... it's BIG, it's OLD, it's BIG Ol' WEED.
Care to run the numbers on which could raise more money for education - legalizing the lottery or legalizing cannabis?
Participating in a Buy Lottery Tickets can be fun, because you never know that you will win until you participate in race. Play it for fun, be optimistic of the out come I am sure it will leave a smile on your face.
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