10:03 AM » How Much Implicit Tax Revenue Did Lotteries Raise in FY2010?
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Christmas may have passed, but today many lottery players were still hoping for Santa to bring them one last gift: . The lucky winner(s) will have to pay tax on the winnings, but probably won't give any thought to the other type of lottery tax: The lottery revenue kept by state governments and used for services like publics education or parks is actually implicit tax revenue. In FY 2010 lotteries generated over $58 billion in consumer spending. This translated to a profit for state coffers of over $17 billion. (Lottery sales had dropped slightly in FY2009, probably due to the recession, but they're on the way back up in 2010.) Slightly over half the money spent is returned to players as prizes. Part of the remainder covers operating costs-including vendor commissions, equipment, administration and advertising-and the rest is transferred to state coffers. States call their portion "profit" but it is actually implicit tax revenue. Lottery proponents argue that a tax is a mandatory payment, and playing the lottery is voluntary, so lottery revenue cannot be tax revenue. But they're confusing the purchase of a product with the payment of the tax on the product. Purchasing a lottery ticket is voluntary, but the tax portion of the ticket price is not, just as a sales or excise tax is compulsory on a voluntary purchase of alcohol, clothing or books. . Policymakers, however, often fail to recognize or acknowledge that the revenue is a tax, preferring to label it "miscellaneous revenue." We can calculate a particular state's implicit lottery tax rate the same way an excise tax rate is calculated. The chart below presents total sales figures and implicit tax rates for most states' lotteries (states with video lottery terminals are omitted) in FY 2010. Lottery Finances, FY 2010 Lottery Jurisdiction FY 2010 Sales (millions) Implicit Tax Rate* Total U.S. $58,816.60 43.7% Arizona $551.50 34.6% Arkansas $383.70 27.5% California $3,086.16 52.0...