Why no tax on lottery winnings in Pennsylvania?

The Powerball Jackpot is $100 million this week.

The MegaMillions is worth $140 million.

Two huge lottery jackpots are there for the taking.

Win them in Pennsylvania, and the state won’t be taking a cut.

Most of you probably didn’t know Pennsylvania doesn’t tax lottery winnings. Don’t feel bad. ABC27 asked five lawmakers about it. All five were unaware, including speaker of the House Mike Turzai.

“I have to honest,” Turzai (R-Allegheny) said with a smile. “I did not know lottery winnings were not subject to personal income tax.”

Neither did Representative Tom Murt (R-Montgomery/Philadelphia). I mentioned it to him at 11 a.m. By noon, Murt said he was in the initial stages of crafting a bill to tax lottery proceeds.

“I was already in touch with Research in the Finance Committee,” Murt said less than an hour after our initial conversation. “I explained the concept as you and I discussed and they’re already working on draft legislation.”

But he, nor I, can claim credit.

Tucked into the depths of Governor Wolf’s budget plan is a proposal to tax lottery winnings over $600. Wolf’s spokesman says that California and Pennsylvania are the only states with income taxes that exempt lottery proceeds. Some states have no income taxes.

“We have a massive budget deficit that we need to close,” Sheridan said. “It’s over two billion dollars, and doing something that every other state but two currently do seems like a no-brainer.”

Wolf estimates it would generate $15 million dollars next year and build to $25 million within three years.

“That’s $15-$20 million that we don’t have to raise the personal income tax or sales tax,” Murt said.

We polled several conservative, anti-tax lawmakers and groups. Most supported the concept of taxing lottery proceeds. Most, but not all.

“I’m an anti-tax guy all the way around,” said Representative Mike Regan (R-York). “I think we need to take other steps to reduce the size of government, look internally first before we look outward.”

But Camilla Brown has a different thought. We caught up with Camilla at the lottery self-serve machine in the Capitol cafeteria. She had a fistful of tickets, a pleasant smile and a generous outlook. She said if she could just win, she’d happily pay Pennsylvania.

“I think that’s fair,” Brown said. “If I win $75 million, I wouldn’t mind paying 3-percent state taxes.”

Lottery winnings are still subject to federal withholdings.

Casino winnings in Pennsylvania are also subject to state income taxes.

We couldn’t get a definite answer as to why lottery winnings are exempt. One theory is that it was an incentive to attract customers to play in Pennsylvania.

Prior to 1999, the state’s General Fund was reimbursed by the Lottery Fund for its lost tax revenue on lottery winnings. That was halted by Act 4 of 1999-2000.

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