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State lotteries a cheap tax on the poor?

April 3, 2012

Are we ready for a time out in the relentless public relations full court press put on by the lottery industry, including the Rhode Island state lottery?

Barely a day goes by without lottery p.r. flacks and their media enablers hyping the latest winners of Mega Millions or thousands or Powerball or whatever the winning total is.

The problem isn’t gambling per se. It is the unremitting government promotion and flogging of gambling that the state gets a cut of.

For those who see lotteries as a cheap tax on the poor, we bring you a piece from Derek Thompson, a senior editor at The Atlantic, where he oversees business coverage for the website.

Citing a PBS report from 2008, Thompson states that households earning less than $13,000 a year spend a shocking 9 percent of their money on lottery tickets.

“For the desperately poor, lotteries perform a role not unlike the obverse of insurance,’’ writes Thompson. “Rather than pay a small sum of money in exchange for the guarantee of protection that you’ll need in the future, you pay a small of money in exchange for the small probability that you’ll win money to help your lot right away. It is, for lack of a better term, a kind of aspirational insurance.’’

Were states better off when the money to run government came from taxes? It is a fact that the bottom of working poor income cohort pays little of no income taxes (they do pay social security levies of course) but if they are tossing their meager funds away on lottery tickets they are certainly paying to support government.

5 Comments leave one →
  1. mangeek permalink
    April 3, 2012 9:42 pm

    Replace them with these lotto-like ‘no lose’ savings plans:

    http://www.freakonomics.com/2010/12/02/freakonomics-radio-who-could-say-no-to-a-no-lose-lottery/

    Basically, every dollar in the savings account is a ‘ticket’, and the winnings come from the interest on all the aggregated savings. It’s basically a psychological trick to get poor people to save instead of spend.

    I won’t get into it too much, but the lack of personal savings is a major reason we had so many foreclosures and such high reliance on the social safety net, even though we have high productivity and overall wages.

    • Mister Guy permalink
      April 4, 2012 8:53 pm

      This is a gimmick. Want more people to save money in the USA? Then you need to give them a real incentive to save. Interest rates have been (& will likely continue to be) very low for a long while now, and people’s incomes have been basically flat for decades. This obviously does not lead people to want to save over the short or long-term.

      What America needs is a version of a tax free savings account, where contributions or withdrawals to such a savings account are never taxed & people can save for whatever they want to save for (not just for retirement).

  2. jason swindell permalink
    January 21, 2013 11:05 pm

    That lucky for life lottery is a scam and they should investergate that, noone won the top prize in 6 or 7 months,theirs been 5 winners since it started at the beginning with a 13,000,000 million chance of winning,all the money going into it is not coming out of it,that’s 6 months twice a wk no winners of the top prize BS.some states haven’t even come close RI only had 25,000 dollar winners the biggest scams in the world

    • jason swindell permalink
      January 21, 2013 11:11 pm

      The lottery is the biggest scam in the world especially aimed toward the poor!! BS its a legal scam!!

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