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News Link • TAXES: State

Lottery buyers line up to pay a tax

• http://edition.cnn.com, By Scott Drenkard
 CNN) -- Friday morning, many Americans lined up outside their local convenience stores, hoping to pick the lucky numbers that would win the record-setting $640 million jackpot offered by Mega Millions. The curious thing about this fervor is not that the odds of winning are 1 in 176 million, but rather that in effect, Americans are anxiously lining up to pay a tax, even if it is wrapped in attractive clothing.
While no government actually labels its lottery a tax, the games properly fit the definition of one. After lottery winnings are paid out and administrative costs have been covered, the leftover money is transferred into state coffers to pay for state programs. This is a tax.
 
State governments have developed a strong reliance on these lottery "profits" over the years. In 2010, states collected an average of $58 per capita in implicit tax revenue from their lottery programs. Delaware, which had the heaviest reliance on lottery revenue, collected a stunning $370 per capita.

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