I've got a proposal... a tax for the poor and middle class. Would that ever fly? Doubt it. I sometimes hear commercials for the Ohio lottery, which says something like "Take a chance on education" because the proceeds go towards education. Something just doesn't ring true for me on that... and I think I've figured it out. It essentially is a tax on the poor and middle class!
First, think about who buys lottery tickets. It sure isn't the rich. So the people who buy the tickets spend $1. The odds of them winning times the jackpot is set to less than $1 (the jackpot I think is even defined as a certain percentage of playing revenue). So there's a profit to be made. That profit goes to the government. Here's the second part. The money is paid over 20 years, or a smaller lump sum is paid immediately. Increases NPV for the gov't. And to top it all off, the government taxes the winnings at like 40%. So net, it's like printing money for the government. So this is basically a tax on people playing the lottery.
I'm lukewarm about the government having a lottery in the first place, tricking their people into handing over cash. And they have a monopoly on it. But it really makes me mad when they start advertising it as you being patriotic or helping education if you play the lottery. If you really want to help education, donate your $1 directly to the school.
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4 comments:
1) I like the lottery. An excess in profits provides a kicker refund to us (in OR) each year. :D
2) sometimes I wish "little squirrel's" father still worked with us. He had the lottery thing figured out. He was crazy about it, which was hilarious considering his opinions of other things; you wouldn't expect him playing the lottery every week (he figured if you play x tickets per week you'll come out on top.) Last I spoke with him (almost a year ago now!) he claimed to be on top by a couple hundred dollars. oooh, over years and years (what would be the ROI if he just put the money in savings??)
In Illinois the Lottery proceeds are supposed to go toward schools - I never thought much went to them, but apparently $622 million went in 2007 according to the Lottery website. Unfortunately, that's only 3% of schools' budgets.
Your concept isn't new; the lottery is often considered to be a tax on the poor (at least by economists). However, players are not tricked into playing...the odds are easy to find and public (they're printed on the backs of scratchoffs and I believe even though they can't give you exact odds on the other lottery cuz it depends on how many people play, they give you a ballbark figure).
It is a legal and voluntary activity. Additionally, even though they claim the money is for education (and Viki suggests it is around 3% of the education budget) how many people do you think actually play the lottery to support education? I doubt that is their reason, so these people would not just donate the money to schools instead.
People who play the lottery a lot probably get teased by their family and friends about how much money they spend and how they'll never win, yet the person will insist that the big one is the next ticket...but I'm guessing at some point someone (or several people) has told them they're wasting their money.
If there was no lottery, what do you think people would do with the money they would otherwise spend on lottery tickets? Invest in/start their 401K or other savings? Take a college class? Pay off credit card/medical bills/other debt? Donate to charity? Buy cigarettes? Buy beer? Go to the local farmers' market? I'm not going to speculate on specifics, but you might find the answer by looking up how people at different income levels spend money. The census might even have rough estimates or have a year where they did a supplemental survey for that type of stuff (haven't looked it up myself)
Beings that it's largely the poor who play the lottery, and the poor have gov't programs available for assistence, someone could run a study to find how much we could decrease spending on gov't assistence programs by canceling the lottery.
p.s. I think KY's slogan is something like "somebody's gotta win, might as well be you." Given how bad KY's education system is, they probably would get less support by advertising how it helps schools...
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