What do they do with the rest of that money?
2007-03-06 08:12:48 · 6 answers · asked by skeezycheeses 2 in Games & Recreation ➔ Gambling
No, to the person who answered before me, it's not taxes; the 370 mm is the gross sum of the equal payments the winner will receive over a 20 year payout period. To get to 220, they have discounted that stream of payments back at about 5.6% to get to the present value.
In other words, they have figured out that 18.5mm per year for 20 years (370/20) is worth the same as 220 mm today, assuming a 5.6% interest rate.
Ultimately, if the winner chose the cash option, they would walk away, after taxes which would almost all be at the highest marginal tax rate of 35%, with about $143mm. That ain't half bad, but it's hardly $370mm.
2007-03-06 08:26:48 · answer #1 · answered by loveitorleaveit1111 2 · 0⤊ 0⤋
In America they have a weird way of announcing lottery prizes. They take the prize pool, and then figure out what they are prepared to pay a winner over the next 20-30 years in annual payouts. Since they don't have to pay out all the money in one go, they are making interest on that prize pool for several years before you ever see the money.
If you take a look at the link you will see examples from each state about what you might win as a one off prize or what you would win if you took the annual payout.
So the $370 million they advertise is the theoretical amount of money you would win if you took the 20-30 year payout. Of course there would often be state and federal taxes to consider too which will further reduce this amount.
The alternative is to take a lump sum in which case you get less money, because the prize pool never really had $370m in it in the first place. Then you pay your taxes and you get what's left.
The bottom line is that this whole concept is misleading. I don't think the lottery should be able to advertise a prize that you don't really get. I also think the government should tax the sale of tickets, so if you win it's tax free. They do this in other countries, and it means that the prize you see advertised is exactly what you receive.
2007-03-06 08:55:12 · answer #2 · answered by ZCT 7 · 0⤊ 1⤋
The 370 million is if you take the 20 year payout. the 220 million is in the bank now but with interest rates in 20 years it will be 370 million. That is why there is such a difference they do not actually have 370 they are counting on the interest from the bank. Below is from the NY lottery website
2007-03-06 08:27:05 · answer #3 · answered by hyperfamilyman 3 · 0⤊ 0⤋
The $370 million is an annunity value over 20 years. The $220 million is up from.
If you choose the annunity, they invest the $220 million and pay you the $370million over 20 years, the difference is the capital gain over that 20 years.
2007-03-06 08:21:03 · answer #4 · answered by joe s 6 · 3⤊ 0⤋
Taxes.
2007-03-06 08:16:46 · answer #5 · answered by Tiss 6 · 1⤊ 3⤋
yep, taxes.
2007-03-06 08:19:54 · answer #6 · answered by Anonymous · 0⤊ 3⤋