Billion Dollar Scam: Why you should play the lottery instead of going to H&R Block

H&R Block is running an aggressive campaign under the rubric “Get Your Billion Back” trying to convince taxpayers to come and have their taxes done by one of their “Tax Professionals”. Their pitch is that “this is how much money is left on the table when people do their own taxes”.

1 Billion Dollars

On their site and in TV ads they provide all sorts of information meant to wow you about how much $1 billion dollar is.

It’s $500 on every seat in every profession football stadium in America!!!

It’s 869,565,217 Bags of Chips!!!

It’s a stack of money that reaches the Van Allen Belts.

It sure sounds like a lot of money. But you know what it really is? It’s bullshit.

The $1 billion they are referring to is “left on the table” by the 56,000,000 Americans who do their own tax returns. The math is simple. That’s an average of less than $20 back per return. Since it costs an average of $198 to have H&R Block do your taxes [1], that is a completely miserable return – a pay out of roughly nine cents for every dollar spent. Or put another way, if everybody who did their own taxes went to H&R Block to have their taxes done, they would spend over $11 billion dollars. That’s 9,641,739,130 bags of chips!!

This is just an insane financial proposition. I don’t know what fraction of people get more than $198 back, but it has to be pretty small. H&R Block say that 1 in 5 people get more money back than they would have if they’d done their taxes themselves. So these people average around $100 back. Even if you’re one of these “lucky” people, you still net negative on average. Plus the upside has to be pretty small – and is capped on the high end by the amount you actually paid in taxes.

Now let’s compare that to everybody’s favorite “bad deal” – the lottery. A typical lottery in the US pays back around 60 cents for every dollar collected (this number varies depending on where you play and which game you play – some states are as low of 50 cents on the dollar, some as high as 70 [2]). But as bad a deal as this is, you are still doing six times better than if you go to H&R Block! Plus, there’s actually the prospect – albeit a small one – of a really big payoff.

If all of those 56,000,000 tax filers used their $198  – or let’s make it $150 so they can buy tax prep software to do it at home – and bought Powerball tickets throughout the year (there are around 100 draws so they’d buy 1 or 2 tickets per draw), that would be around 4.2 billion tickets. With odds of hitting the big jackpot at around 1 in 175 million, that means that 24 of these people would win in jackpot every year – at an average of around $140 million per jackpot (at this point they would actually need to see a tax professional). And another 800 people would win $1,000,000 prizes.

None of this makes playing the lottery a good investment  of course – but it’s a hell of a lot better than falling for H&R Blocks scam that is cynically trying to take advantage of most American’s innumeracy to take billions of dollars off your table.

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