What is being “sold” is a fiction, to collect more “taxes” from willing participants.
In addition to the feds taking 40% of all the “winnings”, the states take 50% or more of the bets off the top.
Pretty much the nature of all gambling outfits, right? The game is rigged for the house to win and in this game, the house is the taxation agencies.
Your point is spot on.
But you’re a total buzz kill.
Clearly, the winning amount is inflated. If a person were to take the lump-sum payment, after taxes were withheld, the winnings would be around 40% of the stated amount in low income-tax states and less in high income-tax states. Fortunately, you're not taxed on the inflated values but on the benefit received which is considerably less.
Personally, I'd take the lump-sum payment rather than trust a government annuity.
There is no question that the lottery is selling a dream. For a couple of bucks, a person buys the fantasy that by a twist of fate, he is going to be rich beyond belief.