This social media post from Livesosa has gone viral in the past couple of days. Seems pretty simple and very enticing.
They claim there is an easy solution to end poverty. It is to simply divide the Powerball winnings among all the American people and each person would receive $4.33 million.
That is a pretty awesome solution to end poverty. It would probably work to a certain extent as well. But there is just one problem. Math.
Let’s take a look at this a little closer.
Currently, the Powerball has an estimated worth of $1.3 billion. This is the largest Powerball ever. In fact, most of the digital signs that you see in stores aren’t capable of showing the large dollar amount.
So what will you do with your $4.33 million? Well, not a whole lot because there is a huge problem with this post.
The United States has more than 300,000,000 million people, but we will use this number for this illustration. So if you give each person $1.00 you would give out $300,000,000. If you give each person $4.00 then you would give out $1,200,000,000. Add in $0.33 per person and you add $99,000,000 which would get us to 1,299,000,000 which is pretty close to the 1,300,000,000 prize. Instead of each person winning $4.33 million it’s actually more like $4.33. So maybe we wouldn’t become millionaires or end poverty. The prize would actually need the prize to be 1.299e+15 in order for each person to get $4.33 million.
But let’s get back to the actual Powerball and let’s pretend that one person wins. The winner would be given $1.3 billion dollars. But that’s not the end of the story either. $1.3 billion is the value of annuity payments if collected over a 30 year period. If you collect the lump sum cash payout it will be a little more than $806 million. That’s before taxes though. To be clear, taxes are going to be something you will be unable to avoid.
The top US Federal Rate is 39.6% on 2016 income. That means you will be responsible for $320 million in Federal Income Taxes. The IRS will automatically take 25% and then you will cut a check for the rest. That still leaves you with $486 million though.
On top of that, you may be responsible to State Income Tax as well. Luckily if you live in the state of PA and buy your ticket in state, you are exempt from paying state tax on your lottery winnings. Other states like New York, will take 8.82% of your winnings.
Let’s not get bogged down with how much in taxes and feel bad that people have to pay out the taxes on their winnings. $486 million is still a ridiculous amount of money.
If you happen to be the winner and are reading this blog post and need an accounting company to help you file taxes, we would be more than happy to help! (haha)