Why Have the Lottery Jackpots Gotten So Big Lately?

Have the massive lottery jackpots increased lately? It seems to me like every time you turn around in the past couple years, either Powerball or Mega Millions, or both, have been over a billion. Can you list, say, the top ten jackpots and their dates? And if it's true that there have been more recently, why is that?

Yes, the multi-state lottery jackpots have gotten more frequent.

Of the top five all-time-highest jackpots, three have been hit in the last two years (since January 22, 2021). And of the top 10, six have been hit since January 20, 2021. The top five have been more than $1 billion.

Here are the top 10 jackpots and when they were hit.

1. Powerball: $2.04 billion, Nov. 8, 2022

2. Powerball: $1.586 billion, Jan. 13, 2016

3. Mega Millions: $1.537 billion, Oct. 23, 2018

4. Mega Millions: $1.337 billion, July 29, 2022

5. Mega Millions: $1.05 billion, Jan. 22, 2021

6. Powerball: $768.4 million, March 27, 2019

7. Powerball: $758.7 million, Aug. 23, 2017

8. Powerball: $754.6 million, Feb. 6, 2023 (two days ago!)

9. Powerball: $731.1 million, Jan. 20, 2021

10. Powerball: $699.8 million, Oct. 4, 2021

As for why, there are several reasons.

First, the higher the windfall gets, the higher it's destined to go. The eye-popping headlines about nine- and 10-figure jackpots bring out the crackpots in all of us -- as evidenced, for example, by Las Vegans driving 80-plus miles round trip and waiting in line for hours to buy their tickets, the vast majority of them no-wins. Depending on state taxes, a $2 billion jackpot, of course, nets in the neighborhood of $600 million (a roughly 50% annuity discount, then a roughly 40% tax bill). But the $2 billion gets the attention and triggers the mass mania.

And speaking of the annuity, those are based primarily on the interest rate, which has been rising and, in turn, jacks up the jackpot. One estimate we've seen is that today, a $1 billion jackpot requires $500 million in the jackpot pool. Only two years ago, that same billion required $700 million in the pool.

Another change is that the price of tickets went up from $1 to $2 (Powerball in 2012 and Mega Millions in 2017). So more money flows in faster to the jackpot pool.

Perhaps the biggest change is that for decades, lotteries have been making it harder to win. In 2015, for example, Powerball added numbers to the drawings that essentially cut in half the chance of matching all six numbers, from 175 million to 1 all the way up to 292.2 million to 1. Mega Millions followed suit in 2017, going from 258.9 million to one in 302.6 million.

So those factors -- harder to win, higher-priced tickets, and rising interest rates -- and others have conspired to drive the jackpots into the stratosphere. We expect to see new records set in the near future.

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Comments

Sandra Ritter Feb-08-2023

If My Logic is Correct

That would mean in the days of higher interest rates, if one is lucky enough to win, and if the prize is transferable upon death, which I believe it is, it would be wise to take the annuity vs cash, since in the example above, the cash value is $200M lower now than it was 2 years ago, and will probably go lower as the Fed keeps raising interest rates.

Texas Transplant Feb-08-2023

Net Lottery value varies by state

You mentioned any winnings you actually receive would be after state income taxes.  A few states, like Nevada and Texas don't have a state income tax so winners would take more "home", a LOT more depending on which other state you are comparing to.

I would venture a guess that if someone in Connecticut won the lottery, but didn't claim it until they became a Texas resident, there is some kind of law in place based on the day the money was won, where they would still be liable for the income tax. 

I'd guess that Mark Wahlberg's recent large Las Vegas area land purchase, no matter what the PR releases might say, has a LOT to do with taxes. I'd bet he, and some of the family will become a Nevada residents to avoid income taxes.  Elon Musk's move from California to Texas save him upward of $2 BILLION.

No matter, I'd be happy to win the lottery in ANY state, (but a little more happy to be in Texas!)  Not counting on it though.

Dorothy Kahhan Feb-08-2023

But still no availability in Las Vegas

It's odd that in the gambling room capital of the world, you can't buy a Lottery ticket in Las Vegas, or all of Nevada for that matter. Not without making a lengthy drive to buy one in an adjacent state. It's long past time that the state legislature fixes this.

Dnalorailed Feb-08-2023

State taxes

@TexasTransplant. I wonder if a Las Vegan would have to pay state taxes to whatever state is named on the winning ticket. No matter that Nevada has no state income tax. In big jackpots like those, the state won’t even release the winnings without first withholding taxes. 
@Dorothy. I suspect the Nevada casino lobby objects to a Nevada state lottery…

Kevin Lewis Feb-08-2023

IT'S BIDEN'S FAULT!!!!!

(Sorry, couldn't resist.)

The simple answer why is: People. Are. Idiots. A lottery ticket purchase is one of the most awful bets of all time. And then you receive an annuity, not the actual jackpot (big difference). Then you get taxed out of your shorts. A $2 billion "winner" winds up with $1.17 and a million new "friends." No, thank you.

Also: wouldn't winning the lottery at ANY amount be life-changing? Why do people flock to the lottery when the amounts get huge? Is there any real, practical difference between winning $400 million and $800 million?

People. Are. Idiots.

Dnalorailed Feb-08-2023

Another Reason

Another reason jackpots grow so fast is that the drawings are held on like 3 days a week now when before they were one or two days a week.

Kevin Lewis Feb-08-2023

Dorothy

The short answer to your question is: if Nevada had a lottery, the money lost by players would wind up in the hands of the government, when the casinos consider such money (i.e., to be lost by gamblers) to be rightfully theirs. It would, in effect, be a tax on casinos. Everybody, put that $2 in a slot machine, the way God and nature intended!!

Another consideration is that Nevada would charge a $100 million resort fee on all lottery jackpot winnings, and that would be a deterrent.

Ray Feb-08-2023

decisions, decisions

To Sandra: Not too long ago in a QoD we had a gazillion (give or take a few zillions) comments about why anyone would choose either the cash or annuity and there were so many opinions exclusive of interest rates that were given. 

And to Texas, IF someone took the annuity, moving might make a difference because the state of income would (might be) be determined each year that it is received. I know that my pension and 401K payout that I earned working in Illinois is not taxed in Illinois, but if I moved, it would be taxable.

Dave_Miller_DJTB Feb-08-2023

Why Primm?

The lottery store in Primm is famous for its long lines when the jackpot is high. But why do people go there? Sure, it’s the closest lottery store to Vegas, but wouldn’t going a little further into California make more sense?

bobd46 Feb-08-2023

Lotto

Lottery Ticket = a tax on people who are bad at math.

Timothy Grant Feb-08-2023

Wrong Date

I think that you have the wrong date on the Mega Millions 1.05 billion jackpot.  I think it should be 1/22/23 not 2021.  There was 1 winner in Maine.

Ray Feb-08-2023

to Dave Miller

Going the extra 50 miles to Baker (each way) would be longer than the lines. I don't think there are other reasonable options for those who want to buy lottery tickets.

Raymond Feb-08-2023

A Lot Depends...

...on where you live and where you bought the winning ticket.  If you bought it in your home state and keep living there, it's simple, you pay your home state.  If you live in a state with no income tax and buy the ticket in a state with a tax, you pay nonresident's tax to the state where you bought it, period.  If you live in a state with a tax and buy it in another state with a tax, you pay nonresident's tax to the state where you bought it and maybe get a full or partial credit against the tax for the state where you live.

If the state where you win has a state income tax, that state will be "gracious" and withhold tax from your winnings, strictly so that you won't owe so much when you

Some states have their own twists on this.  if you live in California and win there, you don't have to pay state tax on your winnings.  

Most states will withhold tax so you have good reason to file.

Doozey Feb-09-2023

How many tickets are sold to get to $1 billion

What is the amount spent on lottery tickets in order to get the jackpot to $1billion? $2 billion? $4 billion?

Question of the Day - 08 February 2023

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