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New Hampshire crushes lottery winners with new 10% tax

New Hampshire LotteryNew Hampshire Lottery: New Hampshire crushes lottery winners with new 10% tax

Two $1M winners rush to get prizes before taxes skyrocket

Will higher taxes have the wrong effect — and  reduce revenue to the state?

The day before a massive 10 percent state tax on lottery prizes went into effect in the Granite State, two winners claimed separate $1 million jackpots — something never before witnessed by a 20-year veteran of the lottery.

Milford High School teacher John Kasparek, 42, of Brookline, took a lump sum cash payment of $650,000 before taxes after a "NH Millionaire's Club" ticket he bought at Caryn's Country Store on Route 13 in Brookline turned out to be one of two $1 million instant winners.

Only hours before Kasparek came forward, Lyndeborough resident James Buchanan turned in the last $1 million winner from the "Million Dollar Riches" game. That ticket was sold at a Silva Mart Meat Shoppe in Milford, according to the commission.

"Definitely a big day on the last day of the fiscal year here at the lottery," said lottery spokeswoman Maura McCann.

Kasparek was the so-called "missing millionaire" lottery officials have been hoping for in recent weeks as they pulled the remaining tickets from store shelves.

The first winners, George and Marlene Muncy, of Amherst, claimed the other $1 million instant prize in 2007.

Kasparek told lottery officials he turned in his ticket Tuesday because he knew a new 10 percent tax on lottery winnings goes into effect today. He said he planned to use the money to pay some bills and take a vacation.

Kasparek did not return calls from The Telegraph seeking comment. Buchanan also was not available for comment.

McCann, who has worked at the lottery for more than 20 years, did not have exact records but does not think two such valuable prizes had been claimed on the same day before.

"I've never had that happen. It's quite unusual to have two, one in the morning and one in the afternoon," she said.

Kasparek's win came at the perfect time. The game was launched two years ago, 97 percent of the tickets had been sold, and the tickets were being pulled from store shelves. Lottery officials were worried the second $1 million winner would not be found.It is difficult to calculate the exact odds remaining when Kasparek bought his ticket, because those odds kept improving as more tickets were sold without the second winner being found.

At the time Kasparek bought his ticket, roughly 97 percent of the 2.1 million tickets had already been sold, according to lottery officials, leaving roughly 60,000 on the shelves.

As a result, each ticket purchased in recent weeks had a roughly 1-in-60,000 chance of being the second winner.

Now that both instant winners have been found, a third person will be awarded $1 million through a drawing. McCann said 200,000 of the NH Millionaire's Club tickets had a star on them. Those tickets that were then mailed to the lottery are entered into the drawing for the third $1 million prize, she said.

New 10% tax making a bad situation worse

The 10% tax mirrors federal gambling tax law and captures gambling winnings of New Hampshire residents resulting from everything from lottery winnings at a local convenience store to bingo at a local church, Texas hold 'em at the track to out of state venues like Foxwoods in Connecticut.

The big concern to residents and lawmakers alike is whether it would drive away those from out of state from gambling in New Hampshire, whether physically, or via Internet.

"Instead of rescuing the tracks they are driving the final nail in the coffin," said Rick Newman, a lobbyist for the Lodge at Belmont, one of the state's two greyhound tracks.

Others raise objections that it might hurt lottery sales at border convenience stores, already hurt by a 45-cent cigarette tax hike passed on Wednesday.

The result may well be lost jobs — good-paying jobs at the state and local level in construction and the hospitality industry, and lost tourist dollars in alcohol, wine, beer and cigarette sales at convenience stores in border communities along the state line from Maine and Massachusetts to Vermont.

In the last several years, the citizens of New Hampshire have stated their preference in various polling data to institute expanded gambling rather than an income tax, sales tax, or capital gains tax. 

By choosing increased taxes over increased gambling revenue, lawmakers may be putting 750 state jobs at risk of layoffs and furloughs.  States and towns across the nation have witnessed the ripple-effect that kind of impact can make, as well as the general decrease in government services caused by a decreased workforce.

In 1964, New Hampshire became the first state-sponsored lottery, to benefit public education, but they may end up becoming one of the last to legalize some form of casino or electronic gambling.

Lottery Post Staff

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30 comments. Last comment 5 years ago by Bostonmanny.
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RJOh's avatar - chipmunk
mid-Ohio
United States
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Posted: July 1, 2009, 8:30 pm - IP Logged

In the nineties Ohio had the best state lottery around with jackpots of $50M+ which attracted players from neighboring states when Ohio lawmakers added a rule that limited the winnings of a single lottery ticket to $20M regardless of the advertised jackpot size and people stopped playing.  They got rid of that rule after a year of declining tickets sales but the lottery never recovered until after 2002 when MegaMillions was added to bring players back and stop them going out of state to play PowerBall and BigGame.

I didn't think I would ever see a similar move again, at least in Ohio, but who knows if it works in New Hampshire  maybe I will.  Ohio is looking for a new source of money too.

* you don't need more tickets, just the right ticket * 
* your best chance at winning a lottery jackpot is to buy a ticket * 
     Wink 

    Avatar
    Myrtle Beach, SC
    United States
    Member #18457
    July 12, 2005
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    Posted: July 1, 2009, 9:19 pm - IP Logged

    This 10% tax is almost like a double standard to the states advantage....... "Hello, congratulation on you win. Here is your check, (snap photo,) now you owe us your winnings...."

    By the time fed and state pull there tax, pick up the crumbs and go....

    What a disappointment for this state. I use to live there and love it.....

    pcnut

    "Wisdom is knowing what to do next, skill is knowing how to do it, and virtue is doing it."

                                                                                                                            David Starr Jordan

    Enjoy

    pcnut

      Bradly_60's avatar - disney37
      Atlantic Mine, Michigan
      United States
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      June 23, 2002
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      Posted: July 1, 2009, 10:32 pm - IP Logged

      10% is totally insane.  Lottery tickets are pretty much a way for the government to get more money and now they are going to tax that money again.  It's double taxation which most states already do but putting 10% on that is crazy.  They must really be hurting to do this.

        Todd's avatar - Cylon 2.gif
        Chief Bottle Washer
        New Jersey
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        Posted: July 1, 2009, 11:34 pm - IP Logged

        10% is totally insane.  Lottery tickets are pretty much a way for the government to get more money and now they are going to tax that money again.  It's double taxation which most states already do but putting 10% on that is crazy.  They must really be hurting to do this.

        Actually, some people truly believe that if you raise taxes you will bring in more money to the government.  As many times as that gets disproved, some people apparently want to continue believing it's true.  These people would rather believe this fairy tale about raising taxes beinging in more money than to face facts that when you lower taxes on all people more money really comes in and the entire economy improves.

        If New Hampshire is really hurting, they should slash taxes and open the new gaming opportunities.  In other words, they should be making their state very attractive for people to visit there and to consider moving there.  What do they do instead?  They make people want to leave (and many will).  They certainly won't be buying their lottery tickets there, given the choice.  Dumb.

         

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          Avatar

          United States
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          Posted: July 1, 2009, 11:47 pm - IP Logged

          Should the White House proposed 39.6% top federal tax bracket be approved by congress, a multi-million New Hampshire (and Montana) Powerball jackpot could potentially have over a 49% total tax obligation.

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            Espanola NM
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            March 25, 2009
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            Posted: July 1, 2009, 11:49 pm - IP Logged

            I bet the folks in Maine or Massassusetts are happy.  They only charge 5%.

            If I lived in New Hampshire ain't no way I am paying 10% on top of the 35% the feds already charge.   I just make the short trip across the border and avoid the NH tax.    I may need to establish residency but since both Maine/Massachusetts allow 1 yr to claim the prize.  It shouldn't be too difficult to estabish residency.

              TheGameGrl's avatar - necros
              Pennsylvania
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              June 10, 2005
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              Posted: July 1, 2009, 11:50 pm - IP Logged

              Valid Points Todd.

              Rjoh floored me with a bit of history about Ohio and its past behavior Lottery wise.

              Really have a hard time grasping the fact they already take 50% of the money and retain for their own use, then decide they want 10% more....Something is soo off about that. Turn it around and simply retain 60% from the get go, making the jackpots grow slower and still attract SOME activity for the games. But to hurt those who are the contributors seems like a slap in the face....

              ________________________________

              Signature quote-Its a true fact that even someone with a dark heart cannot help but be enlightened by a good deed.

                Coin Toss's avatar - shape barbed.jpg
                Zeta Reticuli Star System
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                Posted: July 2, 2009, 12:02 am - IP Logged

                Seeing that the 'current' wave of legalized state lotteries started in New Hampshire I hope this doesn't start a wave of 10% state taxes on winnings.

                Those who run the lotteries love it when players look for consistency in something that's designed not to have any.

                Lep

                There is one and only one 'proven' system, and that is to book the action. No matter the game, let the players pick their own losers.

                  DC81's avatar - batman39
                  MI
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                  Posted: July 2, 2009, 4:46 am - IP Logged

                  New Hampshire doesn't have a normal state income tax (they do have a 5% tax on interest and dividends however) or sales tax, which is probably a "justification" for it but then why not just make it 5% to keep it in line? 10% just seems greedy but I'm sure there's rationalization that the winners are people who don't deserve it so it's okay to take more. I bet that sounds good to non-players though. Maybe Sales and Income taxes aren't allowed by their constitution because it seems to me that even a 1% sales tax with a grocery exemption would generate more revenue than a 10% lottery tax but then again, that'd not be as appealing to voters. Roll Eyes

                  You can't predict random.

                    Avatar

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                    Posted: July 2, 2009, 8:54 am - IP Logged

                    I bet the folks in Maine or Massassusetts are happy.  They only charge 5%.

                    If I lived in New Hampshire ain't no way I am paying 10% on top of the 35% the feds already charge.   I just make the short trip across the border and avoid the NH tax.    I may need to establish residency but since both Maine/Massachusetts allow 1 yr to claim the prize.  It shouldn't be too difficult to estabish residency.

                    For clarification . . quoting from usamega.com/powerball-faq:

                    "If I live in a state that taxes prizes, but bought my ticket in a state with no tax on prizes, do I still need to pay state tax?

                    Yes, you do.  Think of lottery prizes as regular earned income from a job.  Just because you may work in a different state, that doesn't permit you to get away with not paying state income tax in your state of residence.  The lottery works the same way.

                    Whether it's income from a job or income from gambling, the state where the money is won will tax the prize first at their out-of-state tax rate (assuming the state taxes lottery winnings).  If your state of residence has the same or lower tax rate, then you won't owe anything else.  But if your state has a higher rate, you will get a credit for what you paid in the other state, and pay the difference to your state.

                    If the other state has no tax, you just pay the entire tax bill to your state.

                    The net result is that you end up paying whichever tax rate is higher between your state of residence and the state where you purchased the ticket.  Of course, the tax law is quite complex and it's possible that some condition or arrangement exists between the two states and a good tax attorney and/or accountant could discover a tax-saving loophole.  That's why we always recommend that major prize winners do not make any major decisions before first hiring a good legal and financial team.

                    One other option to consider, depending on how much in taxes you're looking to save: the residency requirements as they relate to prize claims, state taxes, and income reporting.  Since you aren't responsible for paying taxes until you claim the prize, perhaps there is time to establish residency in the state where you purchased the ticket before the prize claim period expires.  However, that is something you would definitely need to explore with an attorney before taking any action to assess the feasibility.  You would also need to decide if it would be worth the risk of that important little piece of paper not getting lost, damaged, or destroyed in the time you spend arranging everything."

                      maringoman's avatar - kobold
                      Massachusetts
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                      Posted: July 2, 2009, 3:17 pm - IP Logged

                      I loved making the 45 minute trip northwards to Salem NH to buy me some Hot Lotto and PB tickets but with the new taxes the trip dont make any sense.

                      The lame lawmakers like to play around with the tax thing because it is the only thing that American citizens pay attention to. Too bad the citizens are never too strong against them even when the taxes are crushing people to death like the case right here in Taxachussetts.

                        bytheshore's avatar - am2e
                        California
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                        Posted: July 2, 2009, 7:11 pm - IP Logged

                        What if you live in a state that doesn't tax lottery prizes and buy a ticket from a state that does tax them?

                        I live in California (no tax).  If I bought a PB ticket in NH and it won, would I have to pay the 10% tax to NH?

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                          Espanola NM
                          United States
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                          March 25, 2009
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                          Posted: July 2, 2009, 7:48 pm - IP Logged

                          For clarification . . quoting from usamega.com/powerball-faq:

                          "If I live in a state that taxes prizes, but bought my ticket in a state with no tax on prizes, do I still need to pay state tax?

                          Yes, you do.  Think of lottery prizes as regular earned income from a job.  Just because you may work in a different state, that doesn't permit you to get away with not paying state income tax in your state of residence.  The lottery works the same way.

                          Whether it's income from a job or income from gambling, the state where the money is won will tax the prize first at their out-of-state tax rate (assuming the state taxes lottery winnings).  If your state of residence has the same or lower tax rate, then you won't owe anything else.  But if your state has a higher rate, you will get a credit for what you paid in the other state, and pay the difference to your state.

                          If the other state has no tax, you just pay the entire tax bill to your state.

                          The net result is that you end up paying whichever tax rate is higher between your state of residence and the state where you purchased the ticket.  Of course, the tax law is quite complex and it's possible that some condition or arrangement exists between the two states and a good tax attorney and/or accountant could discover a tax-saving loophole.  That's why we always recommend that major prize winners do not make any major decisions before first hiring a good legal and financial team.

                          One other option to consider, depending on how much in taxes you're looking to save: the residency requirements as they relate to prize claims, state taxes, and income reporting.  Since you aren't responsible for paying taxes until you claim the prize, perhaps there is time to establish residency in the state where you purchased the ticket before the prize claim period expires.  However, that is something you would definitely need to explore with an attorney before taking any action to assess the feasibility.  You would also need to decide if it would be worth the risk of that important little piece of paper not getting lost, damaged, or destroyed in the time you spend arranging everything."

                          I realize that.....but that clarification is assuming you purchase a ticket in a different state and remain living in your original state.   That is how you could get taxed twice.

                           

                          However there is a way around that:

                          Let's say I currently live in New Hampshire.   I decide to purchase a lottery ticket in Maine.     Upon finding out I am a winner.....I immediately move to Maine and establish residency in the state of MAINE(driver license, housing, the whole works).    Since Maine allows winners ONE year to claim a prize,there is sufficient time to move and find a place to live in Maine.  As a Maine resident.....I am no longer under New Hampshire control.  When I claim my prize ONE year later or whenever at MAINE headquarters they will issue a 1099 to my Maine address.   Hence....I only pay Maine taxes

                          It doesn't matter when you purchase the ticket.  All that matters is where and when you claim at lottery headquarters.    I may be mistaken but I think that is how it works.  As long as you are a resident of Maine at the time you claim your ticket.....you are in the clear.

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                            Espanola NM
                            United States
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                            Posted: July 2, 2009, 7:59 pm - IP Logged

                            What if you live in a state that doesn't tax lottery prizes and buy a ticket from a state that does tax them?

                            I live in California (no tax).  If I bought a PB ticket in NH and it won, would I have to pay the 10% tax to NH?

                            Using your example......I think you have to pay NH tax since you bought it in NH which taxes gambling winnings.  NH lottery officials by law is required to report it to NH taxation and revenue.  They will withhold it regardless of whether you live there or not.  The good news is you won't get charged twice since Cali doesn't charge.

                            Now if situation was reversed and you lived in New Hampshire and bought the ticket in California.  California lottery officials will only send a 1099 to the IRS.    If you decide to still live in NH..... NH will still charge you as a "resident" of NH so long you still are considered a "resident" at the time you claim.     Key word is date of the claim....not the date of purchase/drawing.  Keep in mind.......  If you move right away to California......you are considered a resident of California and are no longer a resident of NH.   Since you are not a resident of NH anymore and since you claim the ticket in Cali......you are in the clear.

                            That is why it is important to MOVE to the tax-haven state and establish residency depending on how your state taxes stuff