State lotteries are called a good way to soak the poor
There's one good way to tax the poor more than the rich: set up a state lottery.
Such lotteries, says economist Daniel E. Suits, impose by far the heaviest relative burden on those least able to pay. They are two or three times as ''regressive'' as a sales tax -- soaking those with lower incomes proportionately more than those with higher incomes.
Some 16 states, plus the District of Columbia and Puerto Rico, operate lotteries today. It is the fastest-growing segment of the legalized gambling industry, with sales up some 20 percent to well over $3 billion last year, according to Gaming Business Magazine. Several more states, including Hawaii, California, and Florida, have been considering launching lotteries.
Mr. Suits, a professor at Michigan State University, examined the Michigan lottery, the nation's most successful.He found that low-income people with yearly wages under $5,000 spend about 0.30 percent of their incomes on lottery tickets. High income people with salaries of more than $30,000 spend only about 0.02 percent of their income on this form of gambling.
Some lottery proponents argue that the lottery tickets are not really a tax because no one is forced to buy lottery tickets as people are ''forced'' to pay other taxes.
Professor Suits maintains this view ignores the reality of the situation. Lotteries are successful, he says, because they are usually the only legal game of the kind in town -- the state has a monopoly. The state extracts a ''monopoly price'' by taking some of the lottery money into state coffers.
''The argument about whether the lottery is a tax confuses a difference in form with one of economic substance,'' he adds. ''People also buy liquor only when they want to, but the tax on alcoholic beverages is nevertheless a tax for all that. Nor does the situation change in those states where liquor sales are a state monopoly and the revenue is incorporated directly in the monopoly price.''
Suits says lotteries have become ''almost an irresistible temptation'' for state legislators at a time when taxpayers have fastened their feet against other tax increases, as shown by Proposition 2 1/2 in Massachusetts and Proposition 13 in California. ''They figure it is a tax people will enjoy.''
Suits is opposed to state lotteries, partly because of their regressive tax feature. Further, he notes, they do not produce as much in state revenues as some proponents claim. Michigan gets about 2.5 percent of its revenues from the lottery. And, he assumes, lotteries add to the number of compulsive gamblers. Personally, he does not gamble. ''I don't enjoy it. I don't like the action, and I do detest losing.''
Arnold Wexler did gamble. Indeed, before he quit in 1967, he was spending $ 200 to $300 a week on lottery tickets. Today Wexler is vice-president of the National Council on Compulsive Gambling. ''You know what the lottery is doing,'' he says. ''We are breeding a society of gamblers -- and some of them are going to become compulsive gamblers.''
What especially troubles him about the lotteries is that youths can easily acquire tickets. In New Jersey, he charges, the law prohibits the sale of lottery tickets to anyone under age 18. But there is no enforcement of this provision, says Wexler. Young teenagers can be seen clustering around grocery shops that peddle tickets -- and often these youngsters spend lunch money on the lottery, he adds. One study indicates that 96 percent of all compulsive gamblers started gambling before age 14, Wexler says. ''The lottery is the first step.''
About 6.4 million Michigan residents purchased an average of more than $75 in tickets each during fiscal year 1979-80, generating $483.5 million in sales and , despite the recession. Indeed, one gambling expert says lottery sales go up in hard times. But, he said, no lottery director will admit that. ''They don't want to say people are more desperate in times of economic trouble.'' In Michigan the daily numbers game accounts for a large majority of sales, and the best sales offices are in the black city center and other low-income areas.
That means the poor tend to support the well-to-do with their lottery gambling.