How does lottery work?

[onlyrp]

Ok, I know it's a gambling and guessing game, where the lucky man wins a jackpot of millions.

My question is this, if the goal is for the government to collect taxes, why not just tax on the ticket purchase, and reduce the allocated prize amount? In which case, you can report the "net" amount, and make it tax free to the winner?

For example, if the jackpot is $100M, does that mean they sold 100M tickets for $1 each? If so, why not just tax the prize in advance, and declare that, if the effective tax rate is 30%, there's only $70M as prize money claimable, and the winner does not need to report any additional taxes?

Would that just make too much sense and put too many people out of business?

[BamaAla]

Ok, I know it's a gambling and guessing game, where the lucky man wins a jackpot of millions.

My question is this, if the goal is for the government to collect taxes, why not just tax on the ticket purchase, and reduce the allocated prize amount? In which case, you can report the "net" amount, and make it tax free to the winner?

For example, if the jackpot is $100M, does that mean they sold 100M tickets for $1 each? If so, why not just tax the prize in advance, and declare that, if the effective tax rate is 30%, there's only $70M as prize money claimable, and the winner does not need to report any additional taxes?

Would that just make too much sense and put too many people out of business?

I can't speak to you plan, but I'll tell ya how the lottery works for me: I hop in the car and ride the 50 miles to Tennessee (since lotto tickets are a sin in Alabama,) buy about $50 worth of tickets, drive the 50 miles back to the Heart of Dixie, watch as my numbers aren't drawn, repeat again when the jackpot surpasses $125m. The only thing I do that is more mindless is sticking Skoal in my mouth every day...they are both pretty fun though!

[Danke]

The only thing I do that is more mindless is sticking Skoal in my mouth every day...they are both pretty fun though!

Skoal Extra for the win.

[enoch150]

States already keep a good chunk of the money before the payout. Then they tax it again, after someone wins whatever they pay out.

Massachusetts has the highest payout of lotto sales: 71.9%.
Louisiana has the lowest payout of lotto sales: 51.0%

http://media.bloomberg.com/bb/avfile/r3nbpFLrUooE

A quote from the article: "According to Bloomberg's study, state-run lotteries 'have the worst odds of any form of legal gambling' in America."

http://www.dailyfinance.com/2012/03/...D147238_maing5

[thoughtomator]

Here's how it works...

Step 1) gov't puts population through 12 years of "schooling" that conveniently fails to teach them how to apply simple math to something like the lottery.
Step 2) ????
Step 3) Profit


there's underpants in there also somewhere I think

[fr33]

I call the lottery "the tax on stupid". And now my wife bought into a Mega Millions pool at work.

In many states gambling is illegal but state sanctioned gambling, aka the lottery, is a monopoly with extremely low odds of winning.

[FindLiberty]

I call the lottery "the tax on stupid"...

Try, "Voluntary tax for mathematically challenged optimists."

[Son of Detroit]

I bought my first ever lottery ticket today. I wasn't even carded, which kind of angered me.

[WilliamC]

I can't speak to you plan, but I'll tell ya how the lottery works for me: I hop in the car and ride the 50 miles to Tennessee (since lotto tickets are a sin in Alabama,) buy about $50 worth of tickets, drive the 50 miles back to the Heart of Dixie, watch as my numbers aren't drawn, repeat again when the jackpot surpasses $125m. The only thing I do that is more mindless is sticking Skoal in my mouth every day...they are both pretty fun though!

Redneck

[Kodaddy]

I have a theory that you have almost the same chance of winning the lottery if you don't buy a ticket as you do if you buy a ticket.
(i once found a ticket in the parking lot that was a $5 winner. Also, my mom puts 5 tickets in everyone's Christmas stocking and Easter basket.)