Lottery fever is rising again in the United States. But buyer beware. The advertised jackpots aren’t nearly as big as they look.
On March 26, someone in New Jersey won a jackpot that Mega Millions advertised on its website as $1.13 billion. And Powerball says its current jackpot is $935 million.
These lottery grand prizes are a fortune, no doubt about that. But truth be told, those mouthwatering advertised jackpot numbers aimed at tempting people to buy tickets are misleading. Thanks to the magic of rising interest rates, the advertised numbers have swelled, while the real value of the current lottery prizes isn’t even half that much. And that’s before taking the bite of taxes into account.
The cash you can choose to receive immediately if you win is depicted in smaller type, beneath the so-called jackpot — yet this cash option is the real thing. It’s what the jackpot is actually worth.
“It’s outrageous — we’ve all totally bought in to the lotteries’ framing — and it’s wrong because it gives you the impression that the jackpots are a lot bigger than they really are,” Victor A. Mathesen, a sports economist at the College of the Holy Cross in Worcester, Mass., said in an interview last week.
What lotteries call jackpots are a strange and self-serving formulation that pump up the purported prizes — a framing that has been repeated so many times that people accept it as normal. It’s like bragging that you’ve got a $1 million job, when, actually, you’re paid $1,000 a week and expect to keep working for the next 20 years.
