By Kyle Phillips.
Is there such a person that exists who loves paying taxes? Until recently, I believed that just about every American hated paying taxes, but then I noticed that every time I go into a convenient store or gas station; I see not just one, but many people at each establishment pumping money into the lottery machines and checking old tickets.
Isn’t the lottery just another form of taxation? If you hate paying taxes then why would you of your own free will and accord GIVE your hard earned dollars to the lottery that mostly goes to the government? These are the type of questions that plagued my mind as I dove into the deep end thinking about the state lottery, the revenue it generates, and the mentality of its regular players.
The lottery may be looked at in a few different lights, but as I continued to examine the players of lottery and ask question of the clerks dishing out the tickets, I saw that my perspective of the lottery being a scam to take money out of people’s pockets and put it in the pockets of state government, which could be true, may not be the whole truth of the situation.
A good tax system is one that is fair and easy to understand right? Anyone who has taken a basic economics class has heard that phrase uttered at least once. Both of these qualifiers and many more are met by the lottery system of taxation.
Is it fair?
Well, there are really two ways to look at this question. Are the odds fair? On average, the state lottery pays out about two thirds of the money they take in on prize payouts (this does not include taxes paid on winnings), and although your odds of winning are less than that of you becoming president or being killed by a vending machine, I’ll admit it’s a lot more than I expected to find when I started my research.
The second way to approach this question is not from the angle of how fair the odds are, but if the means of collection are fair, to which I would say absolutely. Unlike the sales tax and income tax that everyone pays at the time of transaction, the lottery tax is completely optional to adults, and are illegal to pay if you are under the age of 18. So basically, the lottery tax is one that you only have to pay if you really want to.
Is it easy to understand?
No. The lottery is so complex that I am yet to meet someone who understands completely how it works, and in doing research and trying to better understand it. I got absolutely nowhere. Don’t believe me? Watch this video that explains it (better than any I could find) and ask yourself afterwards, “Do I understand the lottery any better now than before watching this video?”
Understand it any better? Didn’t think so…
What about the money that it generates?
Believe it or not, in 2009, the lottery generated more money than all of the corporate tax generated per person in nine states. In Delaware, the 2009 lottery generated over $350 per person on average while the corporate tax generated less than $250. Between 2008 and 2010, the State lottery generated an average of about 17 BILLION dollars a year in revenue. As a basis of comparison, in 2010 the federal government (remember, all lottery money is state revenue) took in 2.16 trillion dollars from taxes. While less than a percent in comparison, 17 billion dollars is still a boat load of money bigger than the Titanic.
So is the lottery good or bad?
This is a question that you need to answer for yourself. Is the lottery good for the average player? No, it takes their money and gives them almost nothing back in return. Is the lottery good for an educated and intelligent citizen? Sure it is! It’s money that goes towards public programs without forcibly coming out of your pocket.
What it comes down to is that the lottery is a tax on the dumb and a tax on the desperate. While that isn’t the most moral of ways to take money out of their pockets to line state governments, it is a way that does so without requiring people to do anything they don’t want to. So keep playing America! And I’ll keep watching and laughing.
What if I do win? Will you be laughing then?
Yes, I probably will be. A study done of Lottery winners and people who had been maimed in accidents done in 1978 showed people who win the lottery to be at about the same levels of happiness as the rest of the public, and only slightly higher than that of people suffering from disabilities caused by accidents. This study and many others have shown that money has a very small impact on how a happy a person is. In contrast a heavy correlation has been made through the use of studies between elevated happiness, and giving money away.
So what’s the moral of the story? The next time you’re in a gas station about to spend 10 dollars on a scratch off ticket, buy the homeless person outside or the kid behind you in line a candy bar instead. It will cost less, and have a much bigger impact on your day and mood.