- Associated Press - Thursday, March 29, 2012

PROVIDENCE, R.I. People queuing up for Mega Millions tickets aren’t the only ones salivating over the record $540 million jackpot that could be won Friday - some state governments struggling through lean times know a hometown winner could bring a tax bonanza.

Taxes on a lump-sum payment option to a single winner could mean tens of millions of dollars of badly needed revenue that could go to restore entire social service programs on the chopping block, pay for hundreds of low-income housing units, forestall new taxes or hire more state troopers.

So many tickets have been sold that the jackpot climbed Thursday to the largest in history, according to officials in Rhode Island, one of 42 states where Mega Millions is played. If a lone winner took the lump-sum payout on the jackpot’s current amount, it would be an estimated $389.8 million.

“I’d love it if a Rhode Islander wins,” said Rep. Helio Melo, chairman of the House’s Finance Committee.

In Rhode Island, when the tax man comes calling for his 5.99 percent, that would mean an estimated $23.3 million, forked over in a single payment.

With it, the state could pay for most of a $25 million bond for affordable housing that voters may be asked to approve this fall. It also could help Rhode Island reach its goal for aid to school districts for the first time. The state, which has a $7.9 billion budget, is $22 million short.

States set their own tax rates on lottery winnings. New York, for instance, charges 8.82 percent, while several states, including California, charge nothing.

Ohio’s share of the lump-sum payout would be $23 million, hardly pocket change but still a fraction of the state’s $56 billion two-year budget.

“We’re not holding our breath waiting for a tax windfall for the state, but we will always root for Ohio and Ohioans and hope lottery luck comes to a Buckeye,” said Joe Testa, the state’s tax commissioner.

Connecticut would get more than $26 million in state taxes from a winner who takes the lump sum. The money could be used to help fully pay for Gov. Dannel P. Malloy’s proposal to channel more money to schools, state policy Undersecretary Gian-Carl Casa said.

It also could help get rid of recently imposed sales taxes on nonprescription drugs, at a cost of $17.2 million, with money left over to hire enough state police troopers to meet the statutory minimum of 1,248, at a cost of $8.9 million.

Rhode Island already has a tax windfall coming its way from two recent Powerball wins. An 81-year-old Newport woman won the Feb. 11 jackpot worth $336.4 million, and the winning ticket for $60 million jackpot on March 7 was sold in the state.

Gov. Lincoln Chafee has said the state, which is facing a $117 million budget shortfall next fiscal year, can’t rely on those lottery winnings - and, of course, no state can. But his director of administration recently weighed in, saying of the tax payment: “We’re happy to collect it.”