Federal Government Wins at Powerball, Loses at Tax Policy

December 2, 2005

Everyone loves a winner, and the federal government is no exception—especially when it comes to gambling. Everybody knows that state governments love lottery players and the revenue they bring into state coffers, but we often forget about the benefit to the federal government from gambling. The IRS taxes gambling winnings, so federal coffers also benefit when people win big at Powerball or any other type of gambling.

According to a Southern Standard article, the federal government is the biggest Powerball winner:

The nation's biggest Powerball jackpot winner is the U.S. Treasury, according to figures compiled by the Iowa Lottery and the Multi-State Lottery Association, which operates the lottery game

The federal government has netted at least $2.85 billion since the first jackpot was awarded in 1988.

Before any of the 302 grand prize winners could cash in tickets, which have totaled more than $7.1 billion, the federal government took its $1.9 billion off the top, according to lottery data.

The federal government also has collected $357 million in taxes withheld from winners of lower-tiered Powerball prizes totaling more than $1.3 billion, lottery officials said.

Considering all the problems caused by government-run lotteries—including increased tax complexity, higher tax burdens for the poor, decreased transparency and government accountability, questionable allocations of revenue, and moral objections—should we really consider the federal government a winner in the gambling business?

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