Mega Millions Jackpot Has States Salivating Over Taxes From Possible Winners

States are salivating over the possible tax windfall they could get from a mega millions winner.

PROVIDENCE, R.I. -- People queuing up for Mega Millions tickets aren't the only ones salivating over the record $540 million jackpot that could be won Friday – some state governments struggling through lean times know a hometown winner would bring a tax bonanza.

Taxes on a lump-sum payment option to a single winner could mean tens of millions of dollars of badly needed revenue that could go to restore entire social service programs on the chopping block, pay for hundreds of low-income housing units, forestall new taxes or hire more state troopers.

So many tickets have been sold that the jackpot climbed Thursday to the largest in U.S. lottery history, according to officials in Rhode Island, one of 42 states where Mega Millions is played. If a lone winner took the lump-sum payout on the jackpot's current amount, it would be an estimated $389.8 million.

"I'd love it if a Rhode Islander wins," said Rep. Helio Melo, the chairman of the House's Finance Committee.

In Rhode Island, when the tax man comes calling for his 5.99 percent, that would mean an estimated $23.3 million, forked over in a single payment.

With it, the state could pay for most of a $25 million bond for affordable housing that voters may be asked to approve this fall. It could also help Rhode Island reach its goal for aid to school districts for the first time. The state, which has a $7.9 billion budget, is $22 million short.

A big lottery windfall wouldn't solve the state's fiscal woes, but it could help chip away at the debt, pay for one-time expenses or delay budget cuts or tax increases – including on expensive clothing, pet grooming, car washes and taxi fares – at least for a year, Melo said.

States set their own tax rates on lottery winnings. New York, for instance, charges 8.82 percent, while several, including California, charge none.

Ohio's share of the lump-sum payout would be $23 million, hardly pocket change but still a fraction of the state's $56 billion two-year budget.

"We're not holding our breath waiting for a tax windfall for the state, but we will always root for Ohio and Ohioans and hope lottery luck comes to a Buckeye," said Joe Testa, the state's tax commissioner.

In Montana, lawmakers already could have an excess of $500 million to work with when they write a budget in 2013. Another $50 million or so from tax collections on an in-state Mega Millions win would be icing on the cake.

State Sen. Dave Lewis, a former Montana budget director who now leads the Finance Committee, said he would use his influence to make sure the windfall is used for one-time spending, such as on buildings and infrastructure.

"I just bought a ticket," he said. "I hope it's me."

Rhode Island already has a tax windfall coming its way from two recent Powerball wins. An 81-year-old Newport woman won the Feb. 11 jackpot worth $336.4 million, and the winning ticket for $60 million jackpot on March 7 was sold here.

The Rhode Island Association of School Committees has asked the state to use the $17 million for technology and wireless Internet in schools. That would be in place of a $20 million bond.

Gov. Lincoln Chafee has said the state, which is facing a $117 million budget shortfall next fiscal year, can't rely on those lottery winnings – and, of course, no state can. But his director of administration recently weighed in, saying of the tax payment: "We're happy to collect it."

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Contributing to this report were Associated Press writers Matt Gouras in Helena, Mont.; David Klepper in Providence, R.I.; and John Seewer in Toledo contributed to this article.

Comments

[Paul G2]

05:50 AM on 06/20/2012

What would happen if you win it, and before claiming it you disappear in, say deep ocean diving accident in the middle of the Sahara - body irretrievable! Could your better half, the one you trust - or to be exact your trustworthy recently willed beneficiary claim the full amount - without paying the tax? Are there death duties it's not income by virtue of being gifted so to speak from a deceased estate - are deceased estates taxed, or do they continue to tax the dead? Just asking is all ;)

[rt1027]

12:23 AM on 04/01/2012

or maybe the states could just cut spending

[Barbara0817]

10:56 PM on 03/31/2012

They need to use existing houses, There are alot of empty onse this would not only save money it would fill empty houses.Common sense

[Barbara0817]

10:52 PM on 03/31/2012

I Think a state that is already broke should not be building low income housing , Maybe They should buy some houses that are already forclosures and use Them for low income families at a reduced rate of rent untill They get back on Thier feet.THe goverment doesnt handle Thier money very well,at the federal or the sttae level.I think there were three winners , so no state is getting all the money too bad so sad .

[The Greatest Days]

10:38 AM on 03/31/2012

It is such a curiosity how people complain about a tax on the lottery. How odd it is that someone would say, "No, I deserve 100 million -- just throwing a number out there -- not these measly 60 or 70 million with which you have left me."

Even 10 million is such an obscene amount of money to hoard. Who needs so much money? I mean, really. Be happy that you won and let us move on.

[Yikes11]

10:01 PM on 03/30/2012

op: what th chuck is wron gwith you?

[Yikes11]

09:56 PM on 03/30/2012

And the winning numbers are: 07 18 24 39 55 MBALL 07

[Yikes11]

09:55 PM on 03/30/2012

The winner will be an old white guy on a farm in Idaho who doesn't really need the money.

[Hopalongpoppyseed]

09:39 PM on 03/30/2012

The best thing to do with the money, is spend it fast, before you lose the ability to squeeze through the needle's eye :))

[Kye154]

09:25 PM on 03/30/2012

States have become nothing more than legalized mafia organizations. We should have a constitutional convention and abolish them. Why in the world we have a second tier of 50 non-functional, predatory governments under one federal government doesn't make any sense. The idea of States are relics of the colonial era that should have died long ago.

[Ted229]

07:54 AM on 03/31/2012

OH my....

[oil patch]

08:02 PM on 03/30/2012

typical liberals, salivating at the chance to take money that's not theirs to give it to whom they see fit.

[Hopalongpoppyseed]

09:32 PM on 03/30/2012

I would be delighted to make a big contribution to my state. the state would be welcome to the money. I was born here 66 years ago and it was a blessing. Remember, a shroud has no pockets.

[DIAGUY]

06:55 PM on 03/31/2012

That's their answer for everything. They believe that they are an intellectual group with tons of brain power. But, when the money gets tight they have no solutions other than raising taxes to cover the shortfall. That's an easy way out, a monkey with a note in his mouth can do that.

[Barbara0817]

10:54 PM on 03/31/2012

No common sense

[wanderer12]

06:43 PM on 03/30/2012

I'd love to win obviously. I would hate to have to pay Colorado. A state I would leave behind in a heartbeat. But you know. That is what lawyers are for. A smart person will first find the best tax attorney money can buy.

[bouwob]

05:04 PM on 03/30/2012

So if I win in new york. Can I move and set up residence in Texas to save 30 million in Taxes before claming the ticket?

[wtf is this]

10:43 PM on 03/30/2012

Probably. I think you have a year to claim it. Just don't lose the ticket in that time.

[Ted229]

08:00 AM on 03/31/2012

Nope.

[Mud Flap Girl]

04:45 PM on 03/30/2012

The state politicians are almost as bad as our federal elected officials,

they like to waste $$ as much as the feds, they just do not have as much to throw around---------

[TFlint]

04:45 PM on 03/30/2012

The tax on that win could run a state government for two or three days!