The Real Cost of the Lottery

By Lewis Braham - 2012-11-28T21:32:58Z

Photograph by Richard Drew/AP Photo

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Prizes are taxed as income, with a maximum federal rate of 35 percent and state rate of 11 percent. States keep about a third of ticket sales, which came to $17.7 billion in 2010. Although buying tickets certainly isn't mandatory, economists say the lottery is essentially a regressive tax on the poor and uneducated. According to a 2005 University of Texas study, households making $30,000 to $40,000 a year spent $40 a month on tickets, compared with $20 by those making more than $100,000. High school dropouts spent $50 a month, while those with graduate school degrees spent $13.