The thread on the lottery and life insurance got me thinking. As I understand it, life insurance proceeds are not taxed with the explanation that the premiums were paid with after tax money. Therefore, why are lottery winnings taxed? It seems like they are almost the same thing. Lots of people pay a small amount of money and someone or a small group of people get a large payout. Obviously, life insurance payouts are under much different cirumstances than a lottery payout so maybe the government is just being nice not to tax widows.