Lotteries were once considered a form of hidden tax. But before they were banned in 1826, they were used to fund numerous projects throughout the United States, including Faneuil Hall in Boston and a battery of guns in Philadelphia. Today, you can play a lottery for a designated prize, but there are some misconceptions about how the lottery works. Here are some of them:

Lotteries were a form of hidden tax

It is no secret that state lotteries are a form of hidden tax on the poor. Those making under $13,000 a year lose around 9 percent of their take home income to state lotteries. They also rob local businesses of $50 billion each year in tax revenue. Yet state lotteries are encouraged by state-sponsored ads. And the truth is, there is little evidence to support this claim.

They were used for many projects before they were outlawed

Lotteries played an important role in the history of colonial America. The first lottery in 1612 raised more than two thousand pounds for a project sponsored by the Virginia Company. The lottery system was a common way to fund public-works projects during colonial America, and George Washington sponsored a lottery in 1768 to build a road across the Blue Ridge Mountains. Before lotteries were outlawed, they were often used to fund public-works projects.

They are a game of chance

In lottery games, the winning numbers are randomly chosen. Although participants have little control over the outcome, they can influence the game’s outcome in small ways. For example, the odds of selecting six numbers out of 49 are 14 million to one. This small control can have a profound impact on the outcome of the game. In addition, a game’s luck can influence the outcome in big ways, if the winner is lucky enough to hit a single number.

They are tax-free

Despite the fact that lottery winnings are tax-free, many people still mistakenly believe that they are taxable. However, the government withholds close to 50% of all sales to cover tax obligations. And since the government also makes money from gambling, taxing lottery prizes would be a form of double dipping. There are a number of exceptions to the tax rules. Here’s a rundown of some of the exceptions.