Top 10 Reasons to Ban the Lottery
Americans from almost every state, including Washington D.C. and Puerto Rico, have a chance to strike it big by playing one of many games offered in the lottery. From Powerball to scratch cards, millions of Americans play the lottery every day. If you have never played the lottery then you almost certainly know people who have.
While everyone knows someone who plays the lottery in some form, few people know anyone who has ever won. Of course, there is that lucky person who seems to continuously win $20 from pile of scratch cards, but as a whole, few people know anyone who has ever won a Powerball jackpot worth a few million dollars.
The lottery has become a divisive issue in many states precisely because of this reason. Virtually nobody wins the lottery, and when they do, the fees, taxes and scam services that come out of the checks reduce the winnings from possible millions to the hundreds of thousands. Even if you do win, it seems that winning is not as profitable as they make it out to be.
But, the real reason that the lottery has become so divisive is not because Americans are a bunch of sore losers. It is because the lottery essentially works as a state tax, though it does not advertise itself as one. A high proportion of the lottery revenues go into the state budget and come out again as funding for public works. Though this on its own is not a bad thing.
The problem with the lottery is that it is a tax that is unfairly levied on the most vulnerable people in America. Those who are uneducated or poor are far more likely to play the lottery than those with comfortable incomes and college degrees. In fact, reports say that vulnerable groups spend twice as much on lottery tickets.
The lottery is a predatory tax excised by the government on the most vulnerable people in our society. The advertising makes players believe that they improving social systems or are buying a chance at a better life when the data demonstrates that they are not. As if this were not enough, here are ten more reasons that the lottery should be banned.
Lotteries Take Billions of Dollars Out of the Economy
Since 2008, the government has worked to encourage healthy spending to help get the economy back on track. When the market crashed and the credit crunch became crippling, people stopped spending both the money they do have and the money they don’t have.
Yet, Americans spent $50.4 billion on lottery tickets in 2009 alone. This takes $50.4 billion out of the economy and puts it in the states pocket. Out of that $50.4 billion, the state took home around $17.6 billion. The rest of the money spent running the lottery costs around 8% of the sales. In total, between $21 and $22 billion of all ticket sales disappear into the government’s pocket.
If that money went into consumer spending, or better yet, consumer saving, the state of the average American’s finances would be much improved.
Lotteries Work as a Tax on the Poor
You can play the lottery in most of the 50 states, and you can play the lottery in Washington D.C. and Puerto Rico. The lottery was designed to be a clever way to excise more taxes from citizens without having to officially raise the income or sales tax levels. The humanitarian spin they take has made them very popular.
However, the lottery has remained extremely popular among Americans who simply cannot afford to play the lottery. A recent study by researchers at Cornell University showed that “individuals with lower incomes substitute lottery play for other entertainment…low income consumers may view lotteries as a convenient and otherwise rare opportunity for radically improving their standard of living…we…find a strong and positive relationship between sales and poverty rates.”
The data that supports these findings suggests that households that bring in less than $25,000 each year spend nearly $600 on lottery tickets annually. However, households spending over $100,000 only spent around half of that, and $300 is not a significant amount of money for a house hold with a six figure income. Even $600 is not a significant amount of money to spend annually for these people, but it is a large amount for households making less than $25,000.
Lotteries Target Uneducated Communities
In a study the preceded Cornell’s, Duke University found that people who have attained higher levels of education spend significantly less money on lottery tickets. While a college graduate may spend $178 each year, a college dropout might spend $700 each year on average. That is a huge disparity both in education and in lottery spending.
These studies found that the lottery gained most of its money from those who could least afford it. This provides grounds to the claim that the lottery takes money from the poor and gives it to the rich. Whether or not this is true, the lottery certainly does not take money from the poor and give it back to the poor.
Hence, as a government institution that knowingly and willingly preys on the most vulnerable members of society, the lottery should be banned.
Lotteries Encourage Wrong Information about Poverty
Getting out of poverty is not as simple as receiving a large sum of money from a friend, relative or even the government. By promoting the lottery and offering it as a state-sponsored chance to get rich quick, the government is telling its poorest citizens, who are the biggest investors in the lottery, that they can climb out of their hole with only a single scratch card.
Poverty is a complicated issue that is about more than a bank balance. Understanding poverty is something that sociologists have been working on for years. This is because poverty is a state of mind as well as a financial situation. Poverty includes having inadequate access to material, cultural and social resources that are vital to living a financially successful life.
Poverty also includes social exclusion. When the poor are social excluded and not able to participate fully in society, the problem of poverty is perpetuated. This is why those who are forced to live in poor housing or high crime environments end up seeing generations of all three kinds of poverty despite their best efforts at climbing out.
Solving poverty requires more than the big check that the government suggests is a cure-all. $1 million or even $100 million can be squandered in no time by people who do not understand how to carefully and effectively use money. When the lack of education that is a hallmark of poverty is combined with the poor access to social and cultural resources, many poor lottery winners end up in worse situations when they started off in.
Instead of spending money to improve the resources available to those who are perpetually poor, the government lottery spends its money telling poor people to spend their money on scratch cards and power ball tickets.
Lotteries Enable Gambling, Which Is an Addictive Behavior
The states and the federal government have poured millions, billions and in some cases even trillions of dollars into prevent those with addictive behaviors from finding their vices. The government outlaws drugs, runs negative ads about cigarettes and imposes punishments on those who misuse alcohol in public.
Gambling is an addictive behavior that not only ruins finances, but can become very dangerous. When gamblers get involved with illegal or underground gambling, there are huge consequences to pay for those who often fail to pay up. But instead of banning the lottery, the state governments promote it. The government spends huge amounts of money not only promoting the lottery system but promoting it during prime time so that huge number of people will see it.
Instead of warning citizens about the dangers of compulsive gambling, the government encourages citizens to get involved. They play up the amount of money that is donated to charities to encourage the feel good factor. However, addictive personalities do not need to be motivated by charitable contributions to enjoy gambling. It is the thrill of winning and losing that drives them to the stores.
It is generally recognized in the psychological community that gambling is a problem for those who have addictive personalities. Unfortunately, the lottery moves to fast and changes to frequently for scientists to get concrete data and the true effects of the lottery on state populations.
Winners Rarely Benefit From the Lottery
People do not play the lottery to give money to charity or pay an extra tax to the government: they play to win. The only reason that anyone gambles is for the thrill of winning more money than they walked in with. The chance to win huge sums of money from a state lottery with very little risk only fuels the gambling fire.
However, the big lottery winners rarely see their winnings. After they pay the taxes on their big win, the rest of the money is more often known for destroying families and creating bankruptcies than anything else. People who live pay check-to-pay check one day and win $500 million the next often see their lives delve into complete chaos.
From winners like Urooj Khan, who mysteriously died of cyanide poisoning before his check from the state arrived to Jack Whittaker, the wealthiest man to win a jackpot, some winners turn out to be losers.
The lives of big ticket winners are not improved by unfathomable sums of money. Some suffer family strife as the money becomes more of a burden than a solution. Others have to deal with acquaintances, friends, family and even strangers who demand money and donations from winners.
Too many winners are liable to say that winning the lottery was the worst thing to ever happen to them. If even the winners are losers then this is a great reason to eradicate the state lottery system.
The Chance of Winning the Lottery Is Virtually None
The biggest problem with the lottery is that it is virtually impossible to win. The odds of a normal person winning the lottery are estimated to be 1 in 175 million on average. Instead of the $300-$600 a year that people continue to spend on the lottery year after year, they could spend that money on more achievable goals.
1 in 175 million is plainly low odds. The odds are so low that other seemingly impossible things look easy in comparison. The average persons’ chances of dating a supermodel are 1 in 88,000. The likelihood of becoming a movie star is 1 in 1,505,000. The odds of picking the perfect NCAA bracket are 13,460,000 to 1. You even have a 1 in 12,100,00 million chance of going to space as an astronaut.
What if people spent their money on acting classes and space camp instead of throwing it away on lottery tickets? That money could easily be spent on self-improvement through education and resources. With self-improvement often comes a gain in financial and social equity. This would help alleviate a number of prevalent social issues including poverty.
It’s hard to imagine what the world would be like if lottery players spent $500 a year on self-improvement. But the odds of the world being a better place are probably a lot lower than 175 million to 1.
An Unclear Amount of Lottery Money Stays with the Retailer
The government cannot sell the lottery tickets on their own. That would take the away the fun of paying a tax that does not look like a tax. As a result, each state government has to find retailers who will sell lottery tickets for them.
Retailers are not interested in helping the government collect an extra tax from people. They are only interested if they can get paid for it. There are a lot of reasons that selling lottery tickets is appealing to retailers. They do not need to worry about ordering too much stock. They do not have to find huge amounts of space to store lottery tickets. They don’t even have to worry about the expiration date on most tickets. This means that they can spend a minimal amount of money and resources for a larger profit than traditional goods.
Each state sets the official commission rate for the sales of lottery tickets. The rate usually falls somewhere between five and seven percent on average. This means that out of the $50.4 billion spent every year on lottery tickets, somewhere between 5-7% goes right back to the retailer.
This is not a bad thing. Retailers, many of them small businesses, deserve to be compensated for their role in this money making machine, it is important to remember that 8% of the money already goes to running the lottery. Another $17 billion goes straight to the government. By the time the retailers have their basic share, $24-25 billion, almost half of the revenue, is already gone.
This does not include the cashing in bonuses that retailers receive for turning winning tickets into cash. Most retailers will only be able to cash games that won between $99 and $599 dollars. Many states give retailers 3% of the money that was won and keep it in their pocket.
Retailers also earn bonuses if they sell winning tickets. For every $1 million prize that a retailer sells, they can take home 0.5%. This does not sound like much and the rates of winning big prizes are low, but this means that a retailer makes $500 just for selling a winning ticket. If a store sells a winning $12 million ticket, they might earn a bonus of $60,000. These taxes are excised only when the game has been won but it is important to remember how much money goes where at every point in the process.
The History of the American Lottery Is Sordid At Best
The lottery is not a new concept. Although the current lottery has only existed since the 1970s, the American government has been using the lottery to fund its projects for hundreds of years. During the American Revolution, the building of roads, churches and libraries were often funded by the lottery.
However, by the 19th century, the lottery became a scandalous affair. The lottery never had a winner and most were known for being incredibly corrupt. The state lotteries became so outrageous that the federal government stepped in during 1900 and virtually banned the lottery for most of the 20th century.
There Are Fairer Ways to Tax than Through the Lottery
It is in any politician’s best interest not to be seen as someone who advocates for a raise in taxes. It is generally unpopular with much of the American population. Crying out for huge tax increases on the general public is the fastest way to lose an election and be forced into political exile. That is why the lottery was created in the first place. It is a great way for state governments to bring in money and ensure that those who pay have fun doing it.
But, there are better and fairer ways for states to make money that do not come at the expense of the vulnerable. For example, a tax could be levied on stocks and bonds. States currently make money on the taxes of physical property like buildings, land, homes cars and businesses. However, stocks and bonds are untaxed for the most part. Although this tax would be better instituted at the federal level to ensure that a flat rate of tax is paid, it would bring a huge amount of income into the government from the people who can afford to pay it.
This is an important thing to consider because a surprising number of people keep their assets hidden in ways that are not currently taxed. Warren Buffett, one of the richest men in America, set up Berkshire Hathaway as a way to grow and maintain his wealth without paying taxes on it. The way he runs it is completely legal within the current tax laws. Buffett has been quoted many times as saying that his tax rate remains lower than his personal secretary’s.
There are also corporation tax loopholes that are consistently abused by many of America’s biggest companies. A recent report by Citizens for Tax Justice presented a list of companies that reportedly pay no income taxes. Companies like CBS, Time Warner, General Electric and Mattel have avoided taxes for several years. In addition to not paying taxes, many of these companies actually received a tax rebate. Mattel, which has not paid federal taxes in five years, was handed a rebate for $46 million by the federal government in 2014 alone.
It is easy to see why the lottery is such a controversial issue across America. Although using the proceeds to benefit schools, charities and public works is noble, it is hard to believe that there are not better ways to raise revenue than by exacting it from the state’s most vulnerable citizens.
The data supports the idea that people who are poor, uneducated, black or prone to addiction are spending twice as much as people who could afford it. The lottery is the one addictive vice the government eagerly advertises to its constituents for consumption.
Raising taxes, or even forcing fair taxes, on the rich is a controversial issue and it is not one that will be solved in the near future. Being that CBS has a lot more to lose than the average person living in poverty, a lot more resources will be thrown towards alleviating their tax bill than helping the poor have greater access to social resources.
But, if you consider that poor people spend an average of 9% of their annual income on the lottery, you will find that this tax is significantly higher than the percentage that some of America’s largest company pays. While not much can be done about excising fairer taxes from the top, banning the lottery can prevent further taxation on the bottom. If anything, this reason alone is why the lottery should be banned.