The big news today is that someone in Winner, SD, won the PowerBall Lottery, to the tune of $232.1 Million. Wow. That’s a pile o’money. When I heard about this on the radio this morning the announcer also mentioned something about the SD Lottery Commission having posted info about where the money they took in has been spent, so I decided to have a look.
According to the “Where The Money Goes” page on the SD Lottery website, since the Lottery was first instituted in 1987, the state has netted $1.7 billion (with a ‘B”) from lottery revenues. That’s $1.7 billion that has gone into worthy programs like Property Tax Reduction ($1.3 billion) and Capital Construction ($30 million), and another $389 million in the General Fund. But that $1.7 billion in revenue comprises only 26.2% of the total of all that has been spent on the lottery; since 1987, nearly $6.6 billion has been spent by people trying to earn a quick buck.
Of that $6.6 billion, 55.4% (about $3.6 billion) has gone back out in prizes, and 5.5% ($360 million) in commission payments to retailers, which is money that has stayed in the economy, doing the work that money should do in a thriving economy. So to net that $1.7 billion, a total of about $2.5 billion was siphoned away from the economy. That’s basically an additional tax of about $162 a year for every resident of the state of South Dakota. But it’s not an efficient method of taxing, because more than a third of the money that went to the state (around $850 million) went into running the SD Lottery system. I’d say that’s a lot of overhead for tax money. And that’s just the direct cost; assessing the full societal cost for the problems that state-sponsored gambling bring on and compound is difficult, but it’s surely much, much more than that.
The SD Lottery website boasts that, “The Lottery is a totally self-funded agency. No tax dollars are used for its operation.” which is more than a bit deceiving. Because the lottery is funded through it’s own sales, and people are not required to put money into the lottery, it’s technically not a tax. But I remain unconvinced that money spent on the lottery is not a tax, and I’m not alone. Back in 1732 Henry Fielding wrote the following:
A Lottery is a Taxation,
Upon all the Fools in Creation;
And Heav’n be prais’d,
It is easily rais’d,
Credulity’s always in Fashion;
For, Folly’s a Fund,
Will never lose Ground;
While Fools are so rife in the Nation.
Since the lottery is essentially an elective tax, some taxpayers (Fielding’s fools) are hit harder than others. Our family, for example, hasn’t put one red cent into the lottery, which means that since 1987 someone else has plugged more than $17,000 into the SD Lottery system on our behalf. There are a lot of other people who have avoided the lottery, which means others have ponied up a pile of money to make up the difference; much more than their $162 a year. And the problem is the people who tend to elect to pay this tax are those who can least afford it. Taxes that put a larger burden lower income folks are generally considered ‘regressive’, aren’t they?
While I have actually benefitted from having the lottery in South Dakota, I’ve always felt that the lottery is a poor way for any government to garner income. I don’t expect the lottery to go away any time soon; since being implemented, pulling the plug on the system has been on the ballot three times, and each time a majority voted to have it continue. And that’s too bad because all those millions of dollars could be better spent strengthening the real economy of the state, not filling up the economic trash bin.