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Is the lottery a tax? N.C. appeals court hears arguments

North Carolina LotteryNorth Carolina Lottery: Is the lottery a tax? N.C. appeals court hears arguments

The profit from the sale of lottery tickets in North Carolina is really a tax on the state's residents, which means the law that created the games was passed unconstitutionally, attorneys for a group of taxpayers argued Tuesday before the state Court of Appeals.

"The fundamental criteria is that the revenue is going to the general benefit of the public," Robert Orr, the taxpayers' lawyer, told the three-judge panel. "The lottery was sold as a revenue-raising proposition to raise money for education in North Carolina."

If so, Orr argued, that means lawmakers should have voted on it over two separate days, as required by the state constitution for any bill that would "impose any tax upon the people of the state." In 2005, the House and Senate each approved legislation that led to the creation of the North Carolina Education Lottery in votes cast on a single day.

But Norma Harrell, a lawyer with the state Attorney General's Office, told the court that unlike a sales or income tax, lottery participation by the public is voluntary. "Nobody forces anybody to buy a lottery ticket," she said.

Last year, a Wake County judge last year agreed with the state and dismissed the claim. If the plaintiffs win their appeal, the lawsuit could derail or delay the operations of the lottery, which began selling tickets in March 2006 and recently exceeded $1 billion in total revenue.

The state takes at least 35 percent of ticket revenues — projected to reach $350 million for the fiscal year ending June 30 — and earmarks them for education initiatives, including class-size reduction, pre-kindergarten programs, school construction and college scholarships. It's that use of the money — for such a broad concern as education — that Orr and his clients consider a tax.

If the panel finds the Legislature failed to properly vote on the lottery law, Court of Appeals Judge James Wynn questioned whether the ruling would harm contracts in place with private businesses to operate the lottery. Sales could stop and winnings could be returned, he theorized.

"How can it be done without having all chaos break out?" Wynn asked.

Orr, who is also a GOP candidate for governor, said the court could delay enforcing the ruling, allowing lottery sales to continue until the General Assembly passes a new lottery law.

The plaintiffs who appealed include the Wake County Taxpayers Association and the N.C. Family Policy Council. Lawyers for the nonprofit N.C. Institute for Constitutional Law are representing the taxpayers who sued.

The appeals panel, which also included Judges Ann Marie Calabria and Robert Hunter, didn't say when they would rule, but it likely won't be for a few months.

AP

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5 comments. Last comment 10 years ago by Guru101.
Page 1 of 1
liberal47's avatar - Rowlf
Holt MI
United States
Member #2244
September 4, 2003
69 Posts
Offline
Posted: May 23, 2007, 11:13 am - IP Logged

What a lame attempt to scuttle the lottery. I just wish that paying taxes was a choice, just as buying tickets is! Oh well it is a cheap way for another wannabe to get press!

    LOTTOMIKE's avatar - cash money.jpg
    Tennessee
    United States
    Member #7853
    October 15, 2004
    11338 Posts
    Offline
    Posted: May 24, 2007, 7:37 am - IP Logged

    i get sick of the government putting their zero cents into everything......

      justxploring's avatar - villiarna
      Wandering Aimlessly
      United States
      Member #25360
      November 5, 2005
      4461 Posts
      Offline
      Posted: May 24, 2007, 1:57 pm - IP Logged

      If it is a tax, then the prizes shouldn't be taxed (state or federal)  They can't have it both ways.  That said, our country has a lot of double taxation.  Still, you don't pay tax on your property or income tax, so if buying a lottery ticket is the same as paying a tax, all money won should be tax free.

        tnlotto1's avatar - logo
        nashville
        United States
        Member #49896
        February 18, 2007
        1181 Posts
        Offline
        Posted: May 24, 2007, 3:40 pm - IP Logged

        I Agree! thats a really good point justx because the prizes shouldnt be taxed if the courts find that the actually lottery is a tax when you play it...

          Guru101's avatar - rw6jhh
          Indiana
          United States
          Member #48725
          January 7, 2007
          1953 Posts
          Offline
          Posted: May 24, 2007, 4:17 pm - IP Logged

          No one's making you buy lottery tickets!

          Gonna win.Big Smile