A billion-dollar lottery ticket sold at a grocery store in Detroit’s suburbs will give Michigan an unexpected financial boost, a state official said over the weekend.
Only one winning ticket was sold before Friday’s $ 1.05 billion lottery prize draw. The winner will have the option to accept annual payments or a lump sum of $ 776.6 million, said Jake Harris, spokesman for the Michigan Lottery.
And this is where things start to get better for the state: Michigan law requires the Lottery to withhold state and federal taxes from any winnings of more than $ 5,000.
Michigan taxes the lottery winnings at a rate of 4.25%. This means that the state is expected to receive about $ 33 million in taxes. And since that money is tax revenue, not the proceeds from 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 percent, or about $ 186 million – in federal taxes, Harris said. He or she may also have to pay local taxes, depending on where he lives, although that responsibility rests with the winner.
The windfall will add an extra cushion to what was already a more optimistic than expected budget forecast. A report earlier this month from the Michigan Senate Tax Agency found that the state has billions of extra dollars to spend, reinforced by stimulus checks and approved federal aid as part of last year’s coronavirus relief packages.
Friday’s jackpot was the third largest in American history, after the prizes awarded in 2016 and 2018. It would be the second largest prize ever awarded to a single winner; three people shared the $ 1.58 million Powerball prize in 2016 and a Mega Millions winner took home a $ 1.53 billion jackpot in 2018.