There probably isn’t a single person not wondering what it feels like to be the Powerball winner. Over time, many lucky people have claimed incredible amounts of money. The most recent Powerball winner was lucky enough to win $768 million. He also however, managed to get himself a tax bill which is outrageous by every standard.
The lucky winner is a single ticket from the state of Wisconsin. Back on Wednesday, the ticket correctly guessed all six numbers, the odds of which are one in 290 million. There hasn’t been another win since December and the accumulated jackpot was the 3rd biggest in the history of the lottery.
The Powerball winner is presented with a choice between two payment options. He could decide to take an instant cash prize of lower size or receive the full amount over the course of X years. In this particular case, the winner can choose to receive the “lower” amount of $477 million or have the full $768 be paid to him over the course of 29 years. There is unfortunately, one “small” problem. Both of these options are subject to taxes at both federal and state levels.
Tonight's #Powerball jackpot is $750 million—the 4th largest in history. Keep in mind, if someone wins, as much as half the haul will go to taxes, depending on which state they live in. Lotto winners should always consult a tax pro & financial planner before making big decisions. pic.twitter.com/FtkC2lLox5
— H&R Block News (@HRBlockNews) March 27, 2019
This is amount of money is far greater than life-changing. Of course, it’s important to note that the lucky winners don’t take all the winnings. Big daddy government wants his cut, and in this case, his cut is quite large.
The Powerball winner seems to always be the government
At the moment, the highest federal tax rate is 37% and it applies to every major lottery jackpot. There are also state taxes and in Wisconsin that is 7.65%. So, the Powerball winner is going to give 44.65% back in taxes. In order to see just how much that is, let’s look at how much our Powerball winner will receive if he choses to take his money instantly:
In about 90% of the cases, this is the option preferred by the lucky winners. Big daddy government will instantly hit our winner with a withholding tax of 24%. This means that $114 480 000 is lost instantly. The money will never even make it to the account.
There is of course 13% left of the federal tax rate. $62 010 000 are gone as well, and this is assuming the winner has no deductions on their taxable income. We are only left with the Wisconsin tax of 7.65% which is $36 490 500 out of the remaining money.
Now that that’s out of the way we can see that:
- Our lucky winner is left with: $264 019 500
- The government received: $212 980 500
The reality of the situation is that almost half of the jackpot is gone. $264 million is by no means a small amount of money and can definitely change a lot of lives for the better. If the $212 million however, didn’t go simply disappear into daddy government’s pocket, a lot more can be achieved.
If the state/government put into effect a law that required 30-50% of the taxes collected from jackpots to be used on infrastructure or social programs, the results would be quick and noticeable.
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