I’ve written it many times, and even though I occasionally stray, I still maintain the lottery is a voluntary tax on stupidity.
The odds of winning the Mega Millions are 1 in 175,711,536. Of finishing second and earning $250,000, they are 1 in 3,904,071. Of winning even $10, 1 in 844. And of winning just $2, 1 in 75.
What brought this to mind was an event leading up to the recent after-tax $100 million win by a South Georgia couple.
One of my tax clients was hit with a small under-withholding tax penalty. I was explaining the safe harbors to prevent such penalties and told her one of the most common is to be sure at least one-fourth of the previous year’s total tax has accumulated through each of the four quarterly payment dates. If that’s done, it didn’t matter if you won the lottery late in the year and owed millions; no penalty would apply.
She interrupted, saying, "You mean that if I won the $270 million tomorrow night, there wouldn’t be an under-withholding payment?"
If the jackpot is more than about $100 million, when I happen to get gas I often will get two or three quick picks with the $2 or $3 change. Since I needed gas, I did so the next day. That was it. Another voluntary tax paid on my stupidity. The couple from Portal in South Georgia won it.
It did get me thinking what I’d do if I actually won a big amount like that. I’ve read where so many just like the Portal couple rush to claim it and in the interviews say they’re giving family members this and that, buying a new home or car, quitting the job, etc.
Other stories chronicle many who are about broke within a few years. So what would I, an enrolled tax professional and financial planner, do? I’d remember my standing advice to my tax clients: It’s not what you do, but how you do it.
I’d put in it my safe deposit box and then visit my lawyer, who specializes in such, to devise the most tax-advantaged ways to do what I wanted with the money. No way I can spend all in my lifetime, and my estate would pay millions in estate taxes, depriving heirs and charities of millions if I rushed out and did what so many have done.
I wouldn’t rush to give my children or grandchildren $100,000 in cash or buy them a home or car. The gift wouldn’t be taxable to them, but I’d pay a gift tax higher than the highest personal income tax rate, in addition to the income tax. Much is doable in ways cutting taxes by millions. Wills must be revised. Only after completing all this would I trek down to Atlanta to claim the prize.
Before collecting, I’d prepare a news release. I’ve read and heard of numerous winners being bombarded with salesmen, solicitors, etc., some having to change phone numbers. After obligatory winner’s comments, the release would state that I know what and how I want to do with my winnings.
I have my own brokers, banks, merchants and charities. If I need others, I’ll seek them out. All solicitor calls will result in that caller being disqualified from dealing with me. Period. In other words, if I need what you’re pitching, I’ll find and contact you. Contact me, and you’re automatically out. That might cut down some of the intrusion so many have experienced. It’s worth a try.
Only then would anybody know who won all that jackpot. Winners have up to six months to claim, so I’d have plenty of time.
Will I pay that voluntary tax again? Probably, when the jackpot gets up in the $100 million range again and the car needs gas.
Meanwhile, an idea for John McCain’s running mate: What about Colin Powell. The top military commander in wartime and national security advisor fits the commander-in-chief presidential duties. No legislative branch experience, perhaps a negative. Extensive foreign policy experience as U.N. ambassador and secretary of state. Highly respected on both sides of the aisle for integrity. From a Northeastern state, provides geographical balance.
An African-American national hero, Powell is more right on the crucial Iraq issue and more qualified for the presidency itself than either Democrat still running and possibly McCain himself. The country needs him now more than ever. The question is, would he sacrifice again to serve the country he indisputably loves?
Ask him, persuade him, draft him, McCain, while we wait to see the results of today’s Democratic primaries in Texas and Ohio.
Ted Oglesby is retired opinion page editor. His column appears biweekly and on gainesvilletimes.com.