Do I have to pay tax on my Winnings?
Yes, you are subject to the tax rules where you live, and taxes where the lottery is being held, if it is different from where you live. No US-based lottery will pay out any winnings without first deducting the taxes due on those winnings - usually, a full 38%. US lottery winnings are taxable, as are ALL lottery wins over $600, anywhere in the world, if the player is a US citizen.
How does the lottery compare to other gambling ventures?
The state lotteries typically take about a 40% share of all gambling revenues. This is way above other gambling choices. Most casinos take anywhere from 1-6% on all their games. You can get more bang for your gambling buck by going to a casino- and you'll have more fun too.
The lottery is a rip-off. The odds of winning the lottery are incredibly bad. Consider the following facts: Powerball is drawn twice a week. The odds of winning are 120,526,770 to 1. If you lived to be 77 years old (a normal life expectancy), then you would have to buy 15,050 tickets for EACH drawing (30,100 tickets each week) in order to have a 1 to 1 chance of winning.
Even winning the lottery is not as great as the government advertises because of 3 reasons. First, if you pick a payment plan you don't make interest on the money, the government does. Second, you have to pay big taxes on your winnings. And third, the inflation eats away a lot of the money you get in the future.
Have state governments been increasing their gambling revenues in the last few years to cover budget shortfalls?
The state lottery is a tax. The state takes about 35-40 cents out of every dollar bet on the lottery and redistributes the money as it sees fit.
Is this a good idea? I mean, if I can have fun and potentially win money, then isn't that better than just paying a tax?
Considering that the lottery is a tax (and therefore a redistribution of wealth) and that the lottery is also played more often by poor people then the lottery tax is a regressive tax, which means poor people are taxed at ahigher rate. Every single study shows this. Some people will make the argument that poor people don't have to gamble and therefore don't have to lose money to this tax. But gambling is a form of entertainment which people of all classes take part in. There is nothing wrong with this. Gambling, in moderation, in entertainging and fun. The problem arises when rich people can gamble at much better odds in Las Vegas where they only lose about 1-6% (before comps) of their money instead of the 40% poor people lose because they are too poor to travel to Las Vegas. Lottery taxes are also known to be the most unstable source of government revenues so if the economy were to decline then gambling revnues could decline too.
source: http://www.homepokergames.com/lotterytax.php
Tuesday, May 22, 2007
Lottery Revenue Dollar Allocation
(Fiscal Year 2005 - 2006)
Lottery Revenue Dollar Allocation
Prizes 56% Over $3.8 Billion
Aid to Education 32% $2.203 Billion*
Commissions for Traditional Lottery Facilities 6% $389 Million
Commissions for Video Gaming Facilities 2% $122 Million
Contractor Fees/
Other Direct Expenses 2% $149 Million
Other Operating Expenses 2% $123 Million
Where Schools Get Their Money From
(Fiscal Year 2005-2006)
Local Taxes 46.3% $ 19.99 Billion
State Sources
(Other than Lottery) 38.3% $ 16.52 Billion
New York Lottery 5.1% $ 2.20 Billion*
Federal Sources 6.2% $ 2.67 Billion
Other Local Revenue
and Transfers 4.1% $ 1.79 Billion
Lottery Revenue Dollar Allocation
Prizes 56% Over $3.8 Billion
Aid to Education 32% $2.203 Billion*
Commissions for Traditional Lottery Facilities 6% $389 Million
Commissions for Video Gaming Facilities 2% $122 Million
Contractor Fees/
Other Direct Expenses 2% $149 Million
Other Operating Expenses 2% $123 Million
Where Schools Get Their Money From
(Fiscal Year 2005-2006)
Local Taxes 46.3% $ 19.99 Billion
State Sources
(Other than Lottery) 38.3% $ 16.52 Billion
New York Lottery 5.1% $ 2.20 Billion*
Federal Sources 6.2% $ 2.67 Billion
Other Local Revenue
and Transfers 4.1% $ 1.79 Billion
Some Lottery Statistics...The Hardcore Facts
Statements of Revenue, Expenses, and Changes
in Net Assets Years ended March 31, 2006 and 2005
(In thousands) 2006
2005
Operating revenue:
Lottery revenue, net
$6,802,842
6,270,487
Operating expenses:
Prize expense
(3,853,270)
(3,523,530)
Retailer commissions
(511,059)
(429,182)
Gaming contractor fees
(88,028)
(78,008)
Instant ticket direct expenses
(32,091)
(31,174)
Telecommunications
(28,421)
(29,946)
Total direct expenses (4,512,869)
(4,091,840)
Online games/jackpot marketing (38,771)
(32,555)
Personal service and fringe benefits (25,481)
(24,934)
Instant games marketing (20,916)
(20,357)
All games marketing (14,999)
(17,793)
Other administrative costs (13,502)
(12,717)
State agency charges (9,469)
(6,811)
Total indirect expenses (123,138)
(115,167)
Total operating expenses (4,636,007)
(4,207,007)
Operating income 2,166,835
2,063,480
Nonoperating revenue and (expenses):
Investment income 47,179
14,957
Other revenues (expense), net (143)
166
Investment expense, net (84,492)
(90,968)
Total nonoperating expense (37,456)
(75,845)
Income before transfers out 2,129,379
1,987,635
Transfers out – contribution for aid to education (2,202,619)
(2,062,702)
Change in net assets (73,240)
(75,067)
Net assets beginning of year 289,661
364,728
Net assets end of year $216,421
289,661
Statements of Net Assets
March 31, 2006 and 2005
(In thousands)
Assets 2006
2005
Current assets:
Cash and cash equivalents $331,317
173,901
Accounts receivable 451,198
390,806
Instant ticket inventory 10,183
11,796
Investments 189,237
199,295
Total current assets 981,935
775,798
Long-term investments, net 1,165,778
1,237,322
Other assets 8,067
10,189
Total assets 2,155,780
2,023,309
Liabilities
Current liabilities:
Prizes payable 195,544
203,601
Unclaimed prizes 189,229
210,081
Due to Education 388,920
150,289
Accounts payable and accrued liabilities 17,217
24,536
Capital lease obligations 2,352
2,276
Deferred ticket sales 9,133
9,796
Total current liabilities 802,395
600,579
Compensated absences 4,840
5,566
Long-term capital lease obligations
5,358
7,710
Long-term prizes payable 1,126,766
1,119,793
Total liabilities 1,939,359
1,733,648
Net Assets
Restricted for future prizes 130,129
150,905
Unrestricted 86,292
138,756
Total net assets $216,421
289,661
Total net assets $216,421
289,661
in Net Assets Years ended March 31, 2006 and 2005
(In thousands) 2006
2005
Operating revenue:
Lottery revenue, net
$6,802,842
6,270,487
Operating expenses:
Prize expense
(3,853,270)
(3,523,530)
Retailer commissions
(511,059)
(429,182)
Gaming contractor fees
(88,028)
(78,008)
Instant ticket direct expenses
(32,091)
(31,174)
Telecommunications
(28,421)
(29,946)
Total direct expenses (4,512,869)
(4,091,840)
Online games/jackpot marketing (38,771)
(32,555)
Personal service and fringe benefits (25,481)
(24,934)
Instant games marketing (20,916)
(20,357)
All games marketing (14,999)
(17,793)
Other administrative costs (13,502)
(12,717)
State agency charges (9,469)
(6,811)
Total indirect expenses (123,138)
(115,167)
Total operating expenses (4,636,007)
(4,207,007)
Operating income 2,166,835
2,063,480
Nonoperating revenue and (expenses):
Investment income 47,179
14,957
Other revenues (expense), net (143)
166
Investment expense, net (84,492)
(90,968)
Total nonoperating expense (37,456)
(75,845)
Income before transfers out 2,129,379
1,987,635
Transfers out – contribution for aid to education (2,202,619)
(2,062,702)
Change in net assets (73,240)
(75,067)
Net assets beginning of year 289,661
364,728
Net assets end of year $216,421
289,661
Statements of Net Assets
March 31, 2006 and 2005
(In thousands)
Assets 2006
2005
Current assets:
Cash and cash equivalents $331,317
173,901
Accounts receivable 451,198
390,806
Instant ticket inventory 10,183
11,796
Investments 189,237
199,295
Total current assets 981,935
775,798
Long-term investments, net 1,165,778
1,237,322
Other assets 8,067
10,189
Total assets 2,155,780
2,023,309
Liabilities
Current liabilities:
Prizes payable 195,544
203,601
Unclaimed prizes 189,229
210,081
Due to Education 388,920
150,289
Accounts payable and accrued liabilities 17,217
24,536
Capital lease obligations 2,352
2,276
Deferred ticket sales 9,133
9,796
Total current liabilities 802,395
600,579
Compensated absences 4,840
5,566
Long-term capital lease obligations
5,358
7,710
Long-term prizes payable 1,126,766
1,119,793
Total liabilities 1,939,359
1,733,648
Net Assets
Restricted for future prizes 130,129
150,905
Unrestricted 86,292
138,756
Total net assets $216,421
289,661
Total net assets $216,421
289,661
Wednesday, May 16, 2007
Criticisms of the NYS Lotto
Compulsive Gambling
There is growing evidence that the new games the lotteries have introduced to increase sales are more addictive, and are compounding the problem of compulsive gamblers. Dr. Lance Dodes, Director of the Center for Problem Gambling at Mt. Auburn Hospital in Cambridge Massachusetts, estimates that 40% of his patients are lottery players.43 A 1996 survey in New York found that 9% of lottery players, and 14% of keno players, have been compulsive gamblers at some point in their lives. The study also concluded that keno in particular fosters addiction.44 One study of the effect of VLTs on compulsive gamblers found that the number of individuals in South Dakota seeking treatment for problem gambling declined significantly during a temporary downtime for the lottery's VLTs and rose sharply once they were returned to service.45
This link is widely recognized, even by those in the industry. In the words of one lottery director: "[G]ambling, including playing the lottery, is ... potentially addictive and can be dangerous and destructive for some people, some of the time." 46 The new games "have created what was once an almost unthinkable link between lotteries and compulsive behavior." 47
Despite significant annual revenues from the lottery, however, treatment of compulsive gambling receives relatively little money from the state. In Massachusetts, for example, the state budgeted only $450,000 in FY 1996 on compulsive gamblers, including only $120,000 for actual treatment, even though the lottery revenues for the state amounted to $720 million.48 The Ohio lottery is one of only a few that operates a compulsive gambling treatment operation as part of its regular operations, employing six problem gambling experts. Five states require a telephone number for help for problem gamblers be printed on its lottery tickets.49
Underage Gambling
The sale of lottery games to minors is illegal in every state. However, by all measures, it is commonplace. A survey in Minnesota of 15- to 18-year-olds found that 27% had purchased lottery tickets for themselves.50 Even higher levels of 32%, 34%, and 35% were recorded in Louisiana, Texas, and Connecticut, respectively.51 In Massachusetts, Connecticut, and other states, lottery tickets are available to the general public through self-service vending machines. When one store owner in Boston was asked if minors purchased tickets from the lottery ticket dispenser in his lobby, he replied: "How would I know? No one's watching it." 52 Thus, it is not surprising that a survey conducted by the Massachusetts Attorney General's office found that minors as young as 9 years old were able to purchase lottery tickets on 80% of their attempts, and that 66% of minors were able to place bets on keno games. 75% of Massachusetts high school seniors report having played the lottery.53
Charitable Gambling
The lottery has also apparently had a negative impact on charitable gambling. In 1984, charitable gaming in Massachusetts, such as church bingo, had revenues of $250 million. By 1995, those figures had declined to $200 million. Competition from the lottery is usually blamed, especially following the introduction of keno. "We're getting slaughtered by Keno," said one local rabbi.54
Impact on State Politics
The negative impact on state politics of money connected with the lotteries is often cited by critics, with the commercial suppliers and operators commonly used as examples. GTech and Automated Wagering International (AWI) are the two companies that dominate the lottery supply and lottery operations businesses. In 1997, of the 38 lotteries, GTech had contracts to operate 29; AWI had 7; Massachusetts and Virginia run their own systems. These two companies have contributed heavily to state races. When GTech won the contract to operate the California lottery in 1986, it had been the 6th largest contributor to state campaigns that year, having donated a total of $300,000 to individual state races. In addition, both companies devote substantial sums to lobbying state legislatures and officials. GTech is alleged to have spent $11 million on lobbyists in 1993 alone.55
http://govinfo.library.unt.edu/ngisc/research/lotteries.html
This site addresses all the issues related with gambling throught the NYS lottery
There is growing evidence that the new games the lotteries have introduced to increase sales are more addictive, and are compounding the problem of compulsive gamblers. Dr. Lance Dodes, Director of the Center for Problem Gambling at Mt. Auburn Hospital in Cambridge Massachusetts, estimates that 40% of his patients are lottery players.43 A 1996 survey in New York found that 9% of lottery players, and 14% of keno players, have been compulsive gamblers at some point in their lives. The study also concluded that keno in particular fosters addiction.44 One study of the effect of VLTs on compulsive gamblers found that the number of individuals in South Dakota seeking treatment for problem gambling declined significantly during a temporary downtime for the lottery's VLTs and rose sharply once they were returned to service.45
This link is widely recognized, even by those in the industry. In the words of one lottery director: "[G]ambling, including playing the lottery, is ... potentially addictive and can be dangerous and destructive for some people, some of the time." 46 The new games "have created what was once an almost unthinkable link between lotteries and compulsive behavior." 47
Despite significant annual revenues from the lottery, however, treatment of compulsive gambling receives relatively little money from the state. In Massachusetts, for example, the state budgeted only $450,000 in FY 1996 on compulsive gamblers, including only $120,000 for actual treatment, even though the lottery revenues for the state amounted to $720 million.48 The Ohio lottery is one of only a few that operates a compulsive gambling treatment operation as part of its regular operations, employing six problem gambling experts. Five states require a telephone number for help for problem gamblers be printed on its lottery tickets.49
Underage Gambling
The sale of lottery games to minors is illegal in every state. However, by all measures, it is commonplace. A survey in Minnesota of 15- to 18-year-olds found that 27% had purchased lottery tickets for themselves.50 Even higher levels of 32%, 34%, and 35% were recorded in Louisiana, Texas, and Connecticut, respectively.51 In Massachusetts, Connecticut, and other states, lottery tickets are available to the general public through self-service vending machines. When one store owner in Boston was asked if minors purchased tickets from the lottery ticket dispenser in his lobby, he replied: "How would I know? No one's watching it." 52 Thus, it is not surprising that a survey conducted by the Massachusetts Attorney General's office found that minors as young as 9 years old were able to purchase lottery tickets on 80% of their attempts, and that 66% of minors were able to place bets on keno games. 75% of Massachusetts high school seniors report having played the lottery.53
Charitable Gambling
The lottery has also apparently had a negative impact on charitable gambling. In 1984, charitable gaming in Massachusetts, such as church bingo, had revenues of $250 million. By 1995, those figures had declined to $200 million. Competition from the lottery is usually blamed, especially following the introduction of keno. "We're getting slaughtered by Keno," said one local rabbi.54
Impact on State Politics
The negative impact on state politics of money connected with the lotteries is often cited by critics, with the commercial suppliers and operators commonly used as examples. GTech and Automated Wagering International (AWI) are the two companies that dominate the lottery supply and lottery operations businesses. In 1997, of the 38 lotteries, GTech had contracts to operate 29; AWI had 7; Massachusetts and Virginia run their own systems. These two companies have contributed heavily to state races. When GTech won the contract to operate the California lottery in 1986, it had been the 6th largest contributor to state campaigns that year, having donated a total of $300,000 to individual state races. In addition, both companies devote substantial sums to lobbying state legislatures and officials. GTech is alleged to have spent $11 million on lobbyists in 1993 alone.55
http://govinfo.library.unt.edu/ngisc/research/lotteries.html
This site addresses all the issues related with gambling throught the NYS lottery
Tuesday, May 15, 2007
Where Lottery Revenues Really Go
Where Does Lottery Revenue Go?
Lotteries Provide Little Help for Education, Critics Say
By OLIVER LIBAW
No matter who matched all six lucky numbers in Saturday's $295 million Powerball game, the real winners are supposed to be education, environmental protection, and other projects earmarked to receive lottery proceeds.
The 21 states that participate in Powerball along with the District of Columbia will garner at least $114 million from the $380 million in tickets bought for this jackpot so far.
Some states, like Iowa, put lottery money in the state's general fund, but most target it toward a particular purpose — environmental protection in Colorado, or school aid and crime control in Montana, for example.
Many experts say, however, that even when lottery money is targeted toward a particular purpose, such as education or environmental protection, it has little or no effect.
The lottery money does go to the intended cause. However, instead of adding to the funds for those programs, legislators factor in the lottery revenue and allocate less government money to the program budgets, says one lottery critic, Patrick Pierce, a political scientist at St. Mary's College in Indiana, who has analyzed the impact of lotteries.
"In the first year of a lottery there is a dramatic increase [in spending on education]," he says.
In subsequent years, however, the increase in education spending is much smaller than in states without lotteries, Pierce says, even when adjusting for inflation, number of children in a state, and other factors.
"Given a few years, a state would have spent more on education without a lottery," he concludes.
http://abcnews.go.com/US/story?id=92595&page=1
This article answers my first question of where lottery revenues really go.
Lotteries Provide Little Help for Education, Critics Say
By OLIVER LIBAW
No matter who matched all six lucky numbers in Saturday's $295 million Powerball game, the real winners are supposed to be education, environmental protection, and other projects earmarked to receive lottery proceeds.
The 21 states that participate in Powerball along with the District of Columbia will garner at least $114 million from the $380 million in tickets bought for this jackpot so far.
Some states, like Iowa, put lottery money in the state's general fund, but most target it toward a particular purpose — environmental protection in Colorado, or school aid and crime control in Montana, for example.
Many experts say, however, that even when lottery money is targeted toward a particular purpose, such as education or environmental protection, it has little or no effect.
The lottery money does go to the intended cause. However, instead of adding to the funds for those programs, legislators factor in the lottery revenue and allocate less government money to the program budgets, says one lottery critic, Patrick Pierce, a political scientist at St. Mary's College in Indiana, who has analyzed the impact of lotteries.
"In the first year of a lottery there is a dramatic increase [in spending on education]," he says.
In subsequent years, however, the increase in education spending is much smaller than in states without lotteries, Pierce says, even when adjusting for inflation, number of children in a state, and other factors.
"Given a few years, a state would have spent more on education without a lottery," he concludes.
http://abcnews.go.com/US/story?id=92595&page=1
This article answers my first question of where lottery revenues really go.
Thursday, May 3, 2007
The First Thing I Learned
The first thing I learned regarding my research project is:
"Although the amount of school aid raised by the New York Lottery reached a record $2.2 billion last fiscal year, the percentage of gamblers' dollars earmarked for education plunged to an all-time low as more money was plowed into prizes."
http://www.lohud.com/apps/pbcs.dll/article?AID=/20070129/NEWS05/701290338/1021/NEWS05
-During 2005-06, the Lottery Division sent less than 33 percent of its reported $6.8 billion in revenues to the state's schools.
-By comparison, 55 percent of the $48.5 million in ticket sales, or $26.2 million, went to education after the lottery began in 1967.
-And those percentages are virtually reversed when it comes to prizes, which paid out more than 57 percent of reported revenues in 2005-06, up from 30 percent originally.
"Although the amount of school aid raised by the New York Lottery reached a record $2.2 billion last fiscal year, the percentage of gamblers' dollars earmarked for education plunged to an all-time low as more money was plowed into prizes."
http://www.lohud.com/apps/pbcs.dll/article?AID=/20070129/NEWS05/701290338/1021/NEWS05
-During 2005-06, the Lottery Division sent less than 33 percent of its reported $6.8 billion in revenues to the state's schools.
-By comparison, 55 percent of the $48.5 million in ticket sales, or $26.2 million, went to education after the lottery began in 1967.
-And those percentages are virtually reversed when it comes to prizes, which paid out more than 57 percent of reported revenues in 2005-06, up from 30 percent originally.
Things I Need to Know About the NYS Lotto
The questions I will need to research in order to adequately answer the question of if the NYS lotto is a harmless way to raise revenues without rasising taxes are:
1. What programs do these revenues go to?
2. Does use of the lottery really result in more organized crime?
3. How much would taxes have to be raised if a NYS lottery didn't exist?
4. How much does the NYS lottery add to the revenues?
5. How does the lottery benefit schools and the education system?
6. Do people get addicted to playing the NYS lotto? If so, is this an unhealthy addiction?
7. What are the the pros and cons of the system behind the NYS lottery?
1. What programs do these revenues go to?
2. Does use of the lottery really result in more organized crime?
3. How much would taxes have to be raised if a NYS lottery didn't exist?
4. How much does the NYS lottery add to the revenues?
5. How does the lottery benefit schools and the education system?
6. Do people get addicted to playing the NYS lotto? If so, is this an unhealthy addiction?
7. What are the the pros and cons of the system behind the NYS lottery?
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