Taxes and the Lottery


Lottery is a popular and legal way for states to raise money. Many people spend a lot of time and money playing it, and some become addicted. States promote lotteries as a way to fund public services and help the poor. But it’s important to remember that these funds aren’t free. They must come from someone—and the people who play the lottery pay for it with their taxes.

The idea of distributing property or other assets by drawing lots is as old as human civilization. The Old Testament instructed Moses to take a census of Israel and divide the land by lottery; Roman emperors used lotteries to give away slaves and properties during dinner entertainments called apophoretas. The Continental Congress voted to hold a lottery in 1776, and by 1832 public lotteries raised enough money to build Harvard, Dartmouth, Yale, King’s College (now Columbia), and more than a dozen other American colleges.

Modern lotteries often use a combination of predetermined prizes and random number-picking, but they are not infallible. A single set of numbers is no more likely to win than any other, and your odds don’t get better the more times you play.

The prize fund can be a fixed amount of cash or goods, but more commonly it is a percentage of total receipts. This format reduces the risk to the organizer if there are insufficient ticket sales, but it also limits how large the prize can be. Winnings are sometimes paid out in a lump sum or annuity, and withholding taxes may reduce the amount you receive.