As we’ve said, the lottery is a pretty good deal for the government. (One of the reasons only governments get to run legal lotteries for the most part.) People pay into the prize, of which the government keeps 30% or so (versus 10% for slots in casinos), then when someone wins the state and federal governments get to tax the winnings which depending on the state could be almost 50%.
Lottery officials are required to withhold 24 percent for federal taxes. However, the top marginal tax rate of 37 percent means the winner will owe much more at tax time.