Lottery-Nomics
How the lottery would hurt our economy.
The lottery is an inefficient and unreliable tax that hurts small businesses, costs local jobs, and preys on our most vulnerable citizens with promises of wealth beyond reasonable probability. The lottery, in effect, takes 1.35 billion dollars from the state economy and gives about one-third of it to the state government, one-half of it to gamblers, and one sixth of it to out-of-state lottery companies.
In North Carolina we will be better off growing our economy to generate more revenue, rather than relying on an inefficient lottery tax, which would be a predator of prosperity. Over and above the arguments about its fairness as a tax, the lottery would take money away from small retail businesses, from the manufacturers who supply their products, and from each of the two employees that lose their jobs for every one job created by the lottery.
Rather than looking to the lottery as a quick fix for needed education dollars we should take a bigger picture view and realize that the rate of return on a state lottery just doesn't make sound economic sense.
Quick facts on the North Carolina lottery proposal...
In a typical state lottery, the odds of picking the right numbers are one in 12-14 million. By comparison, your chances of being struck by lightning are one in 1.9 million.
Sandeep Mangalmurti and Robert Cooke, "An Oklahoma State Lottery: Seducing the less Fortunate?," Resource Institute of Oklahoma, April 1994
The odds of winning the typical state lottery are equal to being dealt four royal flushes in a row in spades in a game of poker, then meeting four strangers, all of who have the same birthday.
Lois Gould, "Ticket to Trouble," New York Times Magazine, April 23, 1995, p. 40.
A person is eight times more likely to be killed by a terrorist in a foreign country than to win the lottery.
Larry Oakes, "Anti-gambling group reaches out to young teens," Star Tribune [Minneapolis, MN], October 13, 1998.
States Only Get about 1/3 of Ticket Sales
Only about one third of lottery sales go to the states (as opposed to 100% of regular tax revenues); one half is handed out as winnings (as opposed to 90-96% of what is spent on gambling in casinos);16% goes to those who sell the tickets and manage the lottery.
Peter Keating, "Lotto Fever: We All Lose," Money Magazine, May 1996; "The Lottery: Is it Gambling or is it entertainment?" Chattanooga Resource Foundation, 1999.
Lotteries Cannibalize the Economy
In order for lotteries to survive, they must cannibalize the economy, encouraging people to gamble money they otherwise would have spent at pre-existing businesses in the marketplace, including those selling lottery tickets.
John Kindt, "Legalized gambling activities: The issues involving market saturation," Northern Illinois. Univ. Law Review, v.15-no. 2, 272.
Gambling Takes Money and Jobs out of Local Economies
Dr. John Kindt, University of Illinois, reports, "Gambling activities cost the local economy $2 for every $1 that the gambling industry adds, and two jobs are lost by existing businesses for every job the gambling industry adds."
"The Lottery: Is it Gambling or is it entertainment?" Chattanooga Resource Foundation, 1999.
Lotteries Fail to Deliver on Promises for Small Businesses
For example, in Louisiana, "City News Stand, the business that ceremoniously ushered in the big-jackpot games with a brass band, LSU cheerleaders and a host of state dignitaries, recently got out of the Lotto business entirely. Even though the store got five cents for each $1 ticket, the money did not make up for the lost business on other items, said the owner."
Matt Friederman, "Take close look at other states, vote 'no' on lottery issue on Nov. 3.," Clarion-Ledger [Jackson, MS], 10/28/92, p. 13.
Foods Sales Decline as Lottery Sales Increase
Storeowners in California experienced a decrease in food sales equivalent to the revenue gained from lottery ticket sales. According to a survey of 1,200 stores taken by the California Grocers Association, two-thirds reported an average decline in food sales of seven percent since the beginning of the California lottery.
"Not so small change," Los Angeles Times, March 26, 1986.
Businesses Suffer from Irresponsible Lottery Players
In Florida, business owners tell of people defaulting on payments because of the lottery. One businessman stated that every time he repossessed a mobile home, the floor was littered with lottery tickets. Another said, "we found bucketsful of lottery tickets in each repossessed car."
Money Matters, 9/15/92
Social Costs of Lotteries are Enormous; $150 million for North Carolina
Dr. John Kindt, University of Illinois, estimates that for every dollar that states take in from gambling, they pay three dollars to social agencies and crime fighting. Robert Goodman of Amherst College says a problem gambler costs the state an average of $13,200 a year in social impact. Using that number, and assuming there are six million adults in North Carolina and 2% of the population are problem gamblers, that means the social cost of a lottery to North Carolina is roughly $150 million.
"The Lottery: Is it Gambling or is it entertainment?" Chattanooga Resource Foundation, 1999.; Peter Keating, "Lotto Fever: We All Lose," Money Magazine, May 1996
Lotteries Threaten Economic Growth
"It is probably not an exaggeration to say that the message of lottery advertising is a subversive one — that success lies in picking the right number. This perverse 'education' initiative being promulgated by the lottery agencies may have the ironic effect of reducing government revenues over the long run, by reducing economic growth."
Clotfelter, Charles T., Philip J. Cook, Julie A. Edell, and Marian Moore, "State Lotteries at the turn of the century: Report to the National Gambling Impact Study Commission," Duke University, April 23, 1999, Page 21.
Local Governments will Lose Revenue
The Conservative John Locke Foundation and the Liberal N.C. Budget & Tax Center conducted a joint study and found that North Carolina state and local governments could expect to lose $36.3 million in sales tax revenues if a lottery were implemented, representing more than a 10 percent reduction in expected revenue from the lottery. The revenue losses would be due to lower retail sales as North Carolinians spent discretionary income on untaxed lottery tickets rather than taxable goods sold by retail stores.
John Locke Foundation and N.C. Budget & Tax Center, " Local Officials Doubt Fiscal Need for Lottery," February 19, 2001.
The lottery is an inefficient and unreliable tax that hurts small businesses, costs local jobs, and preys on our most vulnerable citizens with promises of wealth beyond reasonable probability. The lottery, in effect, takes 1.35 billion dollars from the state economy and gives about one-third of it to the state government, one-half of it to gamblers, and one sixth of it to out-of-state lottery companies.
In North Carolina we will be better off growing our economy to generate more revenue, rather than relying on an inefficient lottery tax, which would be a predator of prosperity. Over and above the arguments about its fairness as a tax, the lottery would take money away from small retail businesses, from the manufacturers who supply their products, and from each of the two employees that lose their jobs for every one job created by the lottery.
Rather than looking to the lottery as a quick fix for needed education dollars we should take a bigger picture view and realize that the rate of return on a state lottery just doesn't make sound economic sense.
Quick facts on the North Carolina lottery proposal...
- To net the 450 million dollars in the proposed state budget, the lottery would have to gross 1.35 billion dollars.
- To gross 1.35 billion dollars, each North Carolina household will have to spend $435.48 on the lottery every year.
- To spend $435.48 per year on the lottery, every North Carolina household would have to spend $1.19 daily.
- For that $1.19 spent on the lottery, you could buy every household in North Carolina a loaf of bread each day.
In a typical state lottery, the odds of picking the right numbers are one in 12-14 million. By comparison, your chances of being struck by lightning are one in 1.9 million.
Sandeep Mangalmurti and Robert Cooke, "An Oklahoma State Lottery: Seducing the less Fortunate?," Resource Institute of Oklahoma, April 1994
The odds of winning the typical state lottery are equal to being dealt four royal flushes in a row in spades in a game of poker, then meeting four strangers, all of who have the same birthday.
Lois Gould, "Ticket to Trouble," New York Times Magazine, April 23, 1995, p. 40.
A person is eight times more likely to be killed by a terrorist in a foreign country than to win the lottery.
Larry Oakes, "Anti-gambling group reaches out to young teens," Star Tribune [Minneapolis, MN], October 13, 1998.
States Only Get about 1/3 of Ticket Sales
Only about one third of lottery sales go to the states (as opposed to 100% of regular tax revenues); one half is handed out as winnings (as opposed to 90-96% of what is spent on gambling in casinos);16% goes to those who sell the tickets and manage the lottery.
Peter Keating, "Lotto Fever: We All Lose," Money Magazine, May 1996; "The Lottery: Is it Gambling or is it entertainment?" Chattanooga Resource Foundation, 1999.
Lotteries Cannibalize the Economy
In order for lotteries to survive, they must cannibalize the economy, encouraging people to gamble money they otherwise would have spent at pre-existing businesses in the marketplace, including those selling lottery tickets.
John Kindt, "Legalized gambling activities: The issues involving market saturation," Northern Illinois. Univ. Law Review, v.15-no. 2, 272.
Gambling Takes Money and Jobs out of Local Economies
Dr. John Kindt, University of Illinois, reports, "Gambling activities cost the local economy $2 for every $1 that the gambling industry adds, and two jobs are lost by existing businesses for every job the gambling industry adds."
"The Lottery: Is it Gambling or is it entertainment?" Chattanooga Resource Foundation, 1999.
Lotteries Fail to Deliver on Promises for Small Businesses
For example, in Louisiana, "City News Stand, the business that ceremoniously ushered in the big-jackpot games with a brass band, LSU cheerleaders and a host of state dignitaries, recently got out of the Lotto business entirely. Even though the store got five cents for each $1 ticket, the money did not make up for the lost business on other items, said the owner."
Matt Friederman, "Take close look at other states, vote 'no' on lottery issue on Nov. 3.," Clarion-Ledger [Jackson, MS], 10/28/92, p. 13.
Foods Sales Decline as Lottery Sales Increase
Storeowners in California experienced a decrease in food sales equivalent to the revenue gained from lottery ticket sales. According to a survey of 1,200 stores taken by the California Grocers Association, two-thirds reported an average decline in food sales of seven percent since the beginning of the California lottery.
"Not so small change," Los Angeles Times, March 26, 1986.
Businesses Suffer from Irresponsible Lottery Players
In Florida, business owners tell of people defaulting on payments because of the lottery. One businessman stated that every time he repossessed a mobile home, the floor was littered with lottery tickets. Another said, "we found bucketsful of lottery tickets in each repossessed car."
Money Matters, 9/15/92
Social Costs of Lotteries are Enormous; $150 million for North Carolina
Dr. John Kindt, University of Illinois, estimates that for every dollar that states take in from gambling, they pay three dollars to social agencies and crime fighting. Robert Goodman of Amherst College says a problem gambler costs the state an average of $13,200 a year in social impact. Using that number, and assuming there are six million adults in North Carolina and 2% of the population are problem gamblers, that means the social cost of a lottery to North Carolina is roughly $150 million.
"The Lottery: Is it Gambling or is it entertainment?" Chattanooga Resource Foundation, 1999.; Peter Keating, "Lotto Fever: We All Lose," Money Magazine, May 1996
Lotteries Threaten Economic Growth
"It is probably not an exaggeration to say that the message of lottery advertising is a subversive one — that success lies in picking the right number. This perverse 'education' initiative being promulgated by the lottery agencies may have the ironic effect of reducing government revenues over the long run, by reducing economic growth."
Clotfelter, Charles T., Philip J. Cook, Julie A. Edell, and Marian Moore, "State Lotteries at the turn of the century: Report to the National Gambling Impact Study Commission," Duke University, April 23, 1999, Page 21.
Local Governments will Lose Revenue
The Conservative John Locke Foundation and the Liberal N.C. Budget & Tax Center conducted a joint study and found that North Carolina state and local governments could expect to lose $36.3 million in sales tax revenues if a lottery were implemented, representing more than a 10 percent reduction in expected revenue from the lottery. The revenue losses would be due to lower retail sales as North Carolinians spent discretionary income on untaxed lottery tickets rather than taxable goods sold by retail stores.
John Locke Foundation and N.C. Budget & Tax Center, " Local Officials Doubt Fiscal Need for Lottery," February 19, 2001.
