A billion-dollar lottery ticket sold at a suburban Detroit grocery store will give Michigan an unexpected financial boost, a state official said over the weekend.
Only one winning ticket was sold ahead of the draw for Friday’s $ 1.05 billion prize. The winner will have the choice of accepting annual payments or a lump sum of $ 776.6 million, said Jake Harris, a Michigan Lottery spokesperson.
And this is where things start to improve for the state: Michigan law requires the Lottery to withhold state and federal taxes on any prize over $ 5,000.
Michigan taxes lottery winnings at a rate of 4.25%. This means that the state should receive around $ 33 million in taxes. And because this money is a tax revenue, rather than the proceeds of the sale of lottery tickets, it will fall into the general state fund, rather than into an account dedicated to financing education.
The winner will pay a much larger share – 24%, or about $ 186 million – in federal taxes, Harris said. He or she might also have to pay local taxes, depending on where they live, although this responsibility lies with the winner.
This unexpected windfall will add an extra cushion to what was already a rosier-than-expected budget forecast. A report released earlier this month by the Michigan Senate Tax Agency found the state had billions of additional dollars to spend, bolstered by stimulus checks and federal aid passed as part of the plans. coronavirus relief from last year.
Friday’s jackpot was the third largest in American history, after prizes awarded in 2016 and 2018. It would be the second-largest prize ever awarded to a single winner; three people shared the 2016 Powerball prize of $ 1.58 million, and a Mega Millions winner took home a jackpot of $ 1.53 billion in 2018.