A billion-dollar jackpot might be enough to put anyone’s bank account in the black. But how do lotteries actually make that kind of money? And what happens to all that winning cash after someone claims it? Let’s break it down using Occam’s razor, a 14th-century philosophical principle that suggests the simplest answer is often the correct one.
A good portion of lottery profits goes toward commissions for the lottery retailer that sold the winning ticket. The rest is divvied up among other expenses, including overhead and advertising costs for the state lottery system. The state also takes about 40% of the winnings in taxes, a spokesman for Mega Millions said.
Super-sized jackpots drive ticket sales by generating buzz and earning the games windfall of free publicity on news sites and TV. But it’s important to remember that there are still real people behind those dazzling numbers. And, in a time of limited social mobility, those improbable jackpots can be a powerful draw for people who feel that the only way up is to win the lottery.
For many states, lottery profits help bolster budgets in areas such as roadwork and education. They’re also a major source of revenue for public-service programs such as transportation and prescription assistance, and they can be used to boost local economies by funding new construction and tourism initiatives. In Pennsylvania, for instance, a significant share of lottery profits is earmarked for seniors. And in Maryland, the lottery helps subsidize services like health, senior care and safety.