The U.S. Government Profits From People Who Play State Lotteries

This is from a series of pages on sources of federal war spending other than the federal income tax and strategies that war tax resisters can use to reduce their support of the government in these areas.

State Lotteries

The federal government does not run a lottery, but many states do, and they prohibit or heavily tax non-state-operated gambling, so usually if you are participating in a legal lottery you are participating in a government fundraiser.

Most government funding from lotteries goes to state governments and comes from the difference between the price of lottery tickets sold and the amount of winnings awarded. A typical state government may pay out half of the revenue from ticket sales in prizes and keep the other half for itself (minus some overhead costs).

However, the federal government gets a cut as well by taxing as income the winnings of the big ticket winners.

As one newspaper report put it:

The nation’s biggest Powerball jackpot winner is the U.S. Treasury, according to figures compiled by the Iowa Lottery and the Multi-State Lottery Association, which operates the lottery game.

The federal government has netted at least $2.85 billion since the first jackpot was awarded in .

Before any of the 302 grand prize winners could cash in tickets, which have totaled more than $7.1 billion, the federal government took its $1.9 billion off the top, according to lottery data.

The federal government also has collected $357 million in taxes withheld from winners of lower-tiered Powerball prizes totaling more than $1.3 billion, lottery officials said.

How Can You Resist This Tax?

Obviously, you can resist this tax by not buying lottery tickets. You can also discourage other people from buying them, and, if you run a business, you can opt not to sell lottery tickets.

You can also encourage people to support the decriminalization of private lotteries or the abolition of the state-run lottery in your state.

See Also

I’ve been digging through the archives looking for more information on American Quaker war tax resistance, and found this interesting aside in Susan Martha Reed’s Church and State in Massachusetts, ():

While the Quakers insisted strongly upon resistance to the payment of taxes in certain cases, they were, on the whole, law-abiding citizens, the various meetings using their influence to accomplish this result. The Rhode Island Quarterly Meeting was in much distressed by complaint that certain Friends “Eastward” refused to pay any public taxes to the government on the ground that a great part of the money was used for war. A paper was drawn up on the subject and travelling Friends were asked to urge Hampton and Dover people to pay the rates.

Reed sources this to the records of the Rhode Island Quarterly Meeting pages 38–9 and says “Another case appears in” the records of Dartmouth Monthly Meeting, pages 47–8. I have not been able to check these original sources.

For the most part, American Quakers who resisted war taxes were very careful to distinguish “war taxes” from ordinary and “mixed” taxes, believing themselves to be forbidden from paying the former, but required by just as much of a holy duty to pay the latter. But there is some indirect evidence that some groups of Quakers went to the radical extreme of refusing to pay any tax that went even in part to pay for war. This note in Reed’s book is one example; another comes from a letter from Moses Brown to Anthony Benezet in :

[W]e fear some take up the [war tax resistance] testimony more on account of the authority that demands the taxes than because they are used for war. Such we fear instead of forwarding will eventually retard the testimony, and as some Friends refuse all taxes, even those for civil uses as well as those clear for war and others that are mixed, and thereby dropping our testimony of supporting civil government by readily contributing thereto, it has been a fear whether this variety of conduct won’t mar rather than promote the work. Could we be more united in the ground of our testimony and in our practice in it, I should have more hopes of its speedy obtaining in society. A time will doubtless come when a smaller proportion will be for war than at present when the greater part being for civil uses, friends may pay as there is and ought to be according to the apostle, a conscientiousness in paying to the support of civil government as well as refuse that for war. To refuse the payment of such when even a lesser part be mixed for war before we applied to the authority to separate them would not at present be my place, but probably before that time come when the lesser part will be for war friends may be agreed to ask a separation which, if it should be refused, we might be united in refusing even those the greater part of which may be for civil uses.

I understand some Friends have fallen in with or been overpowered by the common argument that civil government is upheld by the sword, and therefore they decline paying to its support, which appears to me a great weakness, for I see a material distinction between civil government and military, or a state of war, and on this distinction our ancient testimonies was and remain to be supportable of paying tribute and customs for the support of the civil, and yet to refuse to pay trophy money and other expenses solely for war. Civil government is in the restoring and supporting power, yet there is a separation, as of the precious from the vile, in respect of this subject, through the lusts and fallen ages under the specious claim of being the disciples and followers of the Prince of Peace, have greatly contributed to cloud and obscure it.