Massachusetts News 
By Eric Darbe 

May 3--The lottery doesn't do a good job of advertising how much taxes take from jackpot-winnings, say critics, who add that this further veils the amount of money the state takes in from gambling. 

     When a woman recently won the $197-million Big Game lottery, for instance, the state and its lottery bureaucracies took nearly two-thirds of that prize--$127 million.  These "taxes" should be better advertised by state lottery officials, says Citizens for Limited Taxation and Government. 
 
     "The lottery had an advertising budget for years, and when they were advertising they weren't mentioning after-tax income," Barbara Anderson, co-director of  the Peabody-based Citizens for Limited Taxation told Massachusetts News. "People don't recognize it [the tax level] about their paychecks and they don't recognize it about the lottery." 

Government Made About $300 Million From One Drawing 

     The woman who won the $197-million jackpot, for instance, had bought a lump-sum ticket. This immediately cut the amount of her winnings to $104 million. Under lump-sum-ticket rules, Massachusetts and five other states--Michigan, Illinois, Maryland, Virginia, and Georgia-- that offer the Big Game lottery took the other $93 million. 

     Then Massachusetts and the federal government took another $34 million in taxes. Grosso got to keep $70 million. In other words, she got 36% of the advertised jackpot, while the state took 64%, or $127 million. In addition, the lottery says on its Big Game web-page: "Approximately 50% of the money wagered on each drawing goes into the prize pool." This means that lottery players purchased about $400 million in tickets for that one drawing, from which the state(s) immediately took about $200 million. 

Government Loves Public Gambling 

     Politicians used to use the police and the courts to shut down private gambling, but now it's their favorite way to gather revenues, former Cato Institute Senior Fellow Julian Simon has reported.  “Nothing has changed as to whether or not betting is bad or sinful,” he said. “What has changed is that government gets the revenues instead of small-business people. 
 
     "The states do not simply offer their product to the public. They promote hard. Lottery advertisements are beguilingly seductive, and misleading to boot." 
 
     But Dwight Robson, assistant treasurer for Massachusetts, told Massachusetts News: "It is not unlike if you see a job advertised in the paper at $35,000 dollars and you take it. You expect to pay taxes, and don't complain to your new boss when they are withheld. People expect to pay taxes, and I think that the lottery was very up-front with people that they would have to pay taxes on this jackpot." 

     Barbara Anderson said that gambling is a good way for the state to raise revenue because it's non-coercive. People have a choice, "as opposed to other forms of taxation where you are thrown in jail if you don't pay," she said. "But this is about a larger issue, which is truth in advertising. They should have to advertise the jackpot as the amount you get after taxes." 

     While Robson said that "nearly 70% of the $3.2 billion in revenue taken in in fiscal year 1998 went back to players in the form of prizes," he added that this number is a pre-tax estimate. The lottery includes pre-tax amounts in its calculation of what it returns to lottery winners. 

     "We should all refer to any money we make as what it is after taxes,” said Anderson.  "It is time that people recognize that there is before-tax and after tax-income." 
 

RETURN TO FRONT PAGE