This past week, a Mississippi newspaper posed the question, “Would a lottery be good or bad for our state?”
Mississippi is one of the few states who do not have a state-run lottery. As a result, some are asking whether or not they would benefit from legalizing one just like Arkansas did in 2008. Well, allow us to answer the question: No. Here’s why.
Think Lotteries Don’t Constitute a Tax? Think Again.
A lot of people will tell you a lottery is not a tax. Rest assured: it is. When you buy a gallon of gasoline, the money you spend is divided a number of different ways; some of it goes to the gas station; some goes to the gas company that refined and supplied the gas; and some goes to the state. Lottery tickets are similar, with one exception: Most of the money goes to the state.
In Arkansas, if you buy a $1 lottery ticket, about seven cents goes to the store from which you purchased it. The other ninety-three goes right to the State of Arkansas. No one may be forcing you to buy a lottery ticket, but no one forces you to buy gasoline either. You choose to do so, and the government taxes you for it. The sales tax on lottery tickets may be unique, but at the end of the day it’s still a tax.
The Lottery Preys on the Poor
By their nature, sales taxes are regressive. They hit the poor harder than they do the rich. But lotteries are also played disproportionately by the poor.
The watershed lottery report in 1999 by Duke University professors Clotfelter and Cook showed that lower-income citizens are more heavily represented among lottery players. What’s more, while people from all income brackets may purchase lottery tickets occasionally, honest assessments of state lotteries tend to find that lower-income individuals buy lottery tickets more often.
We’ve estimated that an Arkansan who plays the lottery regularly might be spending as much as $1,200 on lottery tickets every year. If you believe the other research out there, you can imagine that most of those players are people who can least afford to spend so much on lottery tickets.
More Money Leaves Your Community With A Lottery Than Without It
In 2008, lottery proponents argued Arkansas was losing money every year because of Oklahoma’s, Tennessee’s, Louisiana’s, Missouri’s, and Texas’ lotteries. They claimed people crossed state lines to purchase lottery tickets, and that Arkansans were subsidizing education programs in other states as a result. On the surface, they were right: Arkansans living close to the border did cross the state line to buy lottery tickets. However, Arkansans have suffered millions of dollars in economic loss as a result of the lottery. In that regard, we were much better off before the lottery showed up.
Here’s how: Before the lottery, only a relative handful of people bought lottery tickets in other states on a regular basis. I would almost guarantee that the number of people in Little Rock or Searcy routinely buying lottery tickets in other states was virtually non-existent, because it was too far a drive. Now, however, people in those areas can buy lottery tickets incredibly easily. When that happens, money gets pulled right out of the local economy; it gets sent to lottery officials in Little Rock; and it almost never comes back.
Recently, we calculated that Greene County residents had spent an estimated $20 – $30 million on lottery tickets in the past two years; that’s such an enormous economic loss, the prize money and scholarship funding can’t come close to recouping it. That’s millions of dollars that went to pay lottery employees, lottery vendors based in other states, and cover other costs.
I don’t care what the lottery proponents say: There’s no way Greene County is better off for having a lottery.
Would Mississippi benefit from a state-run lottery? Well let’s look at Arkansas: Our lottery saps money out of the local economy; it pays back relatively little in the form of college scholarships; it has already been forced to cut scholarship amounts once due to insufficient funds; it has rolled out new forms of gambling at an unprecedented rate; and it has been disastrously mismanaged almost every step of the way since its inception.
I would be hard pressed to come up with one solid way in which the state has benefited from a state-run lottery. I think the few remaining states who do not have state-run lotteries would do well to learn from our mistake.