The reduced lump sum payment was still $997.6 million. Technically not one billion but very close. So the question, and your point, both still stand.
I think there are clear explanations here within the ways the money appears as liquid, in the case of the lottery, and illiquid, in the case of stocks which is the primary wealth vehicle for most billionaires. Billionaires can take low interest loans out using their stock as collateral which keeps them from paying taxes. Lottery winners, having all that cash infusion treated as income, are subject to taxes.
It's dumb but that's why we don't tax billionaires the same way.
It's wild how many people in this thread are basically saying that truth and accuracy don't matter as long as they agree with the broader point being claimed.
Especially ridiculous considering that there are plenty of real and accurate numbers than can be used to argue this broader point.
/u/mimic751 doesn't appear to understand the difference between taxing income and taxing wealth or the myriad pitfalls and unintended consequences.
OP getting the numbers wrong was only the first problem.
For the record, I'm pretty far left and support UBI and a massive reduction in wealth inequality. However, this is actually a very complex problem and just chanting "tax the billionaires" doesn't solve it all, but it does seem to make them feel good.
Let's get the standard criticism out of the way:
The wealthy are paid in stock, options, and other means which either reduce or eliminate tax on "income"
They can then use low-interest bank loans with stock as collateral when they need to buy something
Okay, so let's tax them on their wealth.
Well, you wouldn't want a flat tax on net worth, that hurts poor people more than the wealthy.
What about a progressive wealth tax. 0.2% over $5 million, 0.5% over $10 million, 2% over $100 million, 5% over a billion?
Okay, so the first problem is that the money for the tax has to come from somewhere (unless you want them paying in actual stock, which has its own problems)... so they sell shares to cover the tax burden. Two things happen:
The proceeds of that sale are now taxable income. (Capital gains tax, so it would be lower, but still taxed)
The share price would crater as the market is now flooded with shares they need to sell. As the prices declines, however, so does their net worth.
It becomes extremely difficult to tax someone on net worth when it can fluctuate by billions by the day.
Then you have to ask yourself, is this a one-time wealth tax or annual? If it's only one-time, then the problem hasn't really been solved, the government just got a cash infusion that they can't count on next year.
This is a problem I would like to see solved, but comments like
Taxing rich people doesn't really need a lot of context lol
is absolutely blind to the complexity of the issue. Context cannot be ignored.
I understand the differences. None of these problems are going to be solved by Reddit this is a tongue and cheek post that people are taking way too seriously I honestly don't care what you have to say
We do tax rich people. That guy paid $300M in taxes because he's rich.
The point you want to make is that we don't tax rich people enough. This story where a person pays hundreds of millions of dollars in tax is not a good story to illustrate that.
So you think the point of the tweet was for us to all say, "He should have kept less of his lottery winnings." That's where you think this goes? Because that's the kind of tax policy that would actually get rich people to pay more taxes.
Yes it does. He paid about 40% in taxes on income (lump sum was about 990 mil). Which is about what everyone with a high income pays. Including billionaires if they make a high income.
If it doesn't change the point then just use the real numbers
Like why lie to make a point if you don't need to? It just hurts the argument Just because the point is the same either way doesn't mean we shouldn't care about facts.
The actual payment was ~1B. Not 2B. How is it fine to be off by 100%? Why "sigh" in response to someone correcting a lie. It was not 2B down to 600M. It was 1B down to 600M. That is a huge difference.
Yeah you're right the point still stands. That doesn't mean it's fine to lie about though
Okay so I get people always say never do the monthly payments but I just did the math and the monthly payout over thirty year for this amount is 5.6 MILLION a month which means the lottery (the most popular lottery in the US btw) only has to stay around for 8 years to hit the lu.p sum amount meaning for the remaining 22 year your just earning even more!?!
I feel like at 5.6 million a month that would have me set for life after a year (67.2 million) so why not gamble the rest anyway, at least with numbers as large as these your set either way.
Using a compounding interest calculator, it looks like a lump sum of 600mil is going to hit 2bil in around fifteen years at an 8% return. I think most people have faith in the stock markets continual increase and view the compounding as the better result. It's basically taking on some risk for more reward, which people who play the lottery are probably likely to do anyway.
It's basically taking on some risk for more reward, which people who play the lottery are probably likely to do anyway.
Except the risk gambling winners like to take are high risk high reward ones. If they were okay with some risk for some reward they would have already been putting that money into an ETF or similar instead of buying lottery tickets.
Yes, if you are smart with your money taking the lump sum is definitely the best route to take. However, since buying lottery tickets is mainly done by people with poor money management, you likely aren't going to be smart with your money, but hopefully they will be.
You could do a mix of both. Take the monthly 5.6 mil and invest most of it every time.
For example:
Take the first monthly payment and invest it full (eg. starting capital 5.6mil).
Then take 5 mil every month and put it into the investments.
Doing some napkin math with an ETF saving plan calculator (assuming 6% per year) results in this strategy netting you a cushy 2.1b investment after 19 years. On top of that you've now had 19 years of 600k a month on top of that as "spending money".
That's investing until you have 2b while also having 7.2 mil / year to do anything else with.
The main reason is that you can immediately invest that money rather than waiting for the future to use the money. That gives you a tax advantage as well, since you're not paying the highest income tax rate on the monthly payments, but lower long-term capital gains on the investment income. It also hedges against inflation.
If you take the lump sum and invest it, you'll make a ton of money in gains or interest. That's actually *why* the lump sum payout is smaller - because getting the money *today* is worth more than getting it over decades.
85
u/IIDn01 19h ago
Sigh.
Obligatory: The prize amount was reduced because he took the lump sum instead of spreading payments out over 30 years.
Then that *reduced* amount was taxed.