Editorial: Inflated dreams
Got a ticket and a dream for Friday’s Mega Millions jackpot, pegged at $325 million?
Well, keep dreaming because your buck will buy you about a third of that if you hit all the numbers and are the lone winner.
The Lottery, like all gambling enterprises, thrives on fantasy that often conflicts with reality. The jackpot totals put out by the spinmeisters - and bought lock, stock and barrel by us in the media - are based on the purchase of Treasury bonds and paid out over 26 years in annual payments.
But in fact, no winners of the 10 top jackpots in Mega Millions and its predecessor, The Big Game, chose the annuity, believing they could do better than the estimated 5 percent annual growth on the cash option. And anyone who can’t make better than 5 percent needs more financial help than a few hundred million dollars will buy.
Here’s the breakdown: The cash option for Friday’s drawing is an estimated $191.1 million. Unless you have some serious deductions, you can expect to pay the maximum 35 percent federal tax, a $66.9 million bite, and here in Massachusetts, another $10.1 million for the 5.3 percent state income tax.
That will force you to scrape by on $114.1 million, give or take a few mil. Better than the contract J.D. Drew signed with the Red Sox but not quite the third of a billion dollars being screamed at you from all quarters, including us.
OK, no argument that it’s only $1 and even at the cash payout it’s a 191,000,000 percent profit. But the fact we all glom onto the faux jackpot total tells you how the gambling industry works and why people, especially those who can least afford it, can be talked out of a few bucks despite the 1 in 175 million odds of winning. How many people paid attention a couple weeks ago when the jackpot was still under $200 million in official estimates?
So in the interest of truth in reporting, Friday’s jackpot is $191.1 million dollars, less taxes. Excuse us while we run out to buy a couple tickets.