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The Iowa Lottery: Gamble for the State or Not At All

Alicia Hansen

builds the tax into the price of the ticket. Buying lottery tickets is like buying alcohol in a state-run liquor

d e C o w b o y i s m s t o r e . W i t h b o t h p r o d u c t s , t h e s t a t e p r o h i b i t s t h e p r i v a t e s a l e o f a p r o d u c t , c r e a t e s a m o n o p o l y f o r

. itself, and taxes the product. nway Supporters counter that,

Social Security Alternative Already Working in Texas

Jeff Johnson

continued from page 1 coffers, they maintained the ban

on private lotteries and created for themselves a monopoly and, in effect, a source of tax revenue. McCoy’s proposal to apply the state’s monopoly on traditional lottery games to video lottery games is really a proposal to raise taxes.

Senator McCoy and other lottery proponents may not realize

  • or be willing to acknowledge

  • that lottery tickets are heavily

taxed. In 2003, the 39 lottery states sold $45 billion worth of tickets and kept $14 billion of it. They don’t call this money “taxes,” preferring the term “profit.” But it actually is a tax, and a high one — 45 percent was the average tax rate on a lottery ticket in 2003.

Lottery promoters insist it’s not a tax because playing the lottery is voluntary. But it’s the purchase of the ticket that’s voluntary, not the tax. Of course, no one has to buy lottery tickets, but if you want one, you have to pay the tax. It’s the same as purchasing a car or cigarettes or any other taxed item; sales and excise taxes are not optional. The only difference is that the lottery tax is hidden better the state creates a monopoly for itself and

regardless of the tax implications, lotteries are still a voluntary, harmless activity. Their argument may work for private gambling, but not for state-run gambling. Suppose the state outlawed the sale of bread at private grocery stores and started selling bread itself — at $20 a loaf? What if the state started selling and advertising cigarettes to raise money for public schools? The purchase of bread and cigarettes would still be voluntary, but people would be outraged. The voluntary nature of state-run lotteries does not absolve them from the same scrutiny to which we subject other government activities. Lotteries are a government enterprise and a source of tax revenue, and must be evaluated as such.

The lottery is a detrimental tax for three reasons. First, since tax revenue pays for general public services, it is important that taxes be levied as broadly as possible rather than on a subset of the population who happen to enjoy a particular product or service. But politicians, loath to make the politically unpopular move of raising income or sales taxes, reason that voters will be more accepting of a high tax on a recreational activity like gambling.

Second, many studies have

shown that lotteries are regressive, continued on page 6

he personal retirement plan T s k e t c h e d o u t i n P r e s i d e n t B u s h s S t a t e o f t h e U n i o Address has been universally derided by Democrats as an unworkable privatization of the retirement program. n

“As we fix Social Security, we also have the responsibility to make the system a better deal for younger workers, and the best way to reach that goal is through voluntary personal retirement accounts,” Bush said during the address Wednesday night.

“Here is how the idea works: Right now, a set portion of the money you earn is taken out of your paycheck to pay for the Social Security benefits of today’s retirees,” Bush explained. “If you’re a younger worker, I believe you should be able to set aside part of that money in your own retirement account, so you can build a nest egg for your own future.”

President Bush warned the nation that 13 years from now — in 2018 — Social Security will start paying out more than it takes in. He also had a message for Americans 55 and older: “Do not let anyone mislead you,” he said. “For you, the Social Security system will not change in any way. For younger workers, the Social



Public Interest Institute, May 2005

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