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Government lotteries are for suckers.

ITEM: The Nashville (Tenn.) City Paper for December 1, 2005, reported: "College students on a state lottery scholarship can breathe a sigh of relief. The state announced Wednesday that it expects to have enough money to fully fund the lottery scholarship program when it extends to all four collegiate grade levels next fall."

The paper continued: "The announcement came during the Tennessee Education Lottery Corporation's presentation of its expected future revenues to the state's funding board, which helps formulate Tennessee's annual budget. After the presentation, Department of Finance Commissioner Dave Goetz said that it was 'encouraging' that the lottery corporation's estimates were similar to the expected revenues the state's fiscal review committee submitted."

ITEM: A press release issued by the Multi-State Lottery Association, promoting the Powerball game, reported on December 4: "Players should carefully check their tickets after every draw. Even if there are no jackpot winners there are always tens of thousands of winners at other prize levels. Players purchased more than $19.7 million in tickets between Wednesday and Saturday night. The lotteries sold more than $2 billion in Powerball tickets in FY05. That translates into more than $600 million for worthwhile state projects."

CORRECTION: Leaving aside the morality of having the government spend tax dollars to encourage gambling, the alleged financial benefits of state lotteries are vastly overstated. Moreover, the targets of lotteries are generally those who can least afford to spend money, and have a minuscule chance of striking it rich.

The regressive nature of lotteries is borne out not only by common-sense observations, but by numerous studies and reports. The government in New Jersey is among the most aggressive in promoting its lottery; a study by the Star-Ledger of Newark not long ago showed that it is largely low-income areas of that state that are fueling the sales of such tickets.

According to the data, the New Jersey Lottery sells an average of $250 worth of tickets annually per capita in areas where the average income is below $52,000--more than twice the amount as in areas where incomes are above $100,000, despite the fact that the higher income areas have more money to spend. In addition, there are more lottery ticket retailers in lower-income areas (even taking into account that people may play the lottery in areas other than where they live).

A broader study, made a few years ago at the behest of the U.S. Congress, found that the poorest players of the lottery not only spend a higher proportion of their income on tickets but also a larger actual total. Those with the least education spent the most. The National Gambling Impact Study Commission, for example, found that lottery participants in households with incomes under $10,000 spent $597 per capita each year, compared to $196 by those with household incomes over $100,000.

To combat a negative stigma toward lotteries, proponents of lotteries are quick to argue that the games of chance fund various "worthwhile" projects--which is how they get their foot in the door with the legislatures in the first place. However, even when funds are supposedly earmarked for some educational purposes (such as college scholarships in Tennessee), the claims ring hollow.

Knowing that their states are likely to have future proceeds from lottery money and that lottery money is often earmarked for educational spending, legislatures are prone to take the revenue they would have spent on schools and spend it elsewhere--since the lottery funds help fill the resultant gaps in the education budget. With a largely regressive system such as lotteries, this means that those with low incomes are essentially subsidizing middle-income citizens (largely the users of college scholarships, for example).

Occasionally, a government official will give away the game. As one former New York state comptroller admitted in NAS-ACT News, a professional publication for government financial officers: "Most of us have fallen for the myth that lottery money is used to increase funding for education. But that's just a myth. The lottery money has never supplemented state aid--not yesterday, not today, and, most likely not tomorrow."

There are myriad reasons why lotteries have been known as a "tax on the stupid." The overwhelming likelihood of losing is one reason. The odds of winning the top prize in Powerball--the game operated by the Multi-State Lottery Association--is about one in 146 million. As a columnist for the Allentown (Pa.) Evening Call observed recently, "You're twice as likely to drop dead while reading this newspaper column than you are to win a Powerball jackpot."

Yet, the average American in fiscal year 2002, according to statistics cited by the Tax Foundation, spent more on lotteries than on reading materials.

While lottery officials don't like to admit it, the lottery they are pushing (via tax-supported advertising) is essentially a tax--albeit a "sin tax." Proponents fall back on the argument that it is "voluntary." However, the fees that go to the state and federal governments are as involuntary as the taxes that are placed on alcohol sales (another voluntary purchase with a mandatory tax).

In her valuable study for the Tax Foundation, "Lotteries and State Fiscal Policy," Alicia Hansen wonders whether governments should be encouraging this behavior. After all, she observes, this is an activity "that was banned for 70 years and considered to be a cause of crime, potential addiction and large financial losses. Some states devote part of the proceeds to programs for gambling addiction, which shows that they are aware of the potential problems. State lotteries are unique among government agencies in that they actively encourage participation in an activity that they prohibited only 40 years ago--an activity from which they now profit."

Government-run lotteries are monumental rip-offs with an infinitesimal chance for big payoffs. Talk about a sucker bet!
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Title Annotation:Correction, Please!
Author:Hoar, William P.
Publication:The New American
Geographic Code:1USA
Date:Jan 9, 2006
Words:961
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