Archive for the ‘Lottery’ Category
There’s a sucker born every minute
According to the AP, there’s at least one enterprise that is actually doing more business in the present economy: the Tennessee Lottery.
In these tough times, many people appear willing to gamble a few precious dollars in the hope of winning instant deliverance from their economic woes.
More than half of all states with lotteries have reported rising sales over the past six months, and some researchers say financial insecurity might be driving people to risk more of their money than usual on $1 and $5 instant scratch-offs and other daily games in hopes of a big payoff.
“Someday somebody is going to win and I hope it is me,” said Albert Atwood of Nashville, who spends $100 weekly playing the Pick 5 and Lotto Plus. “I imagine that I would be a heap better off if I saved this money, but everybody has dreams.”
Driven by regulars like Atwood and a growing number of occasional players, 25 of 42 states with lotteries have experienced higher sales of scratch-off and daily lottery games since July, according to Scientific Games, a maker of scratch-offs.
>> In Tennessee, sales of instant lottery games were up $8 million during the fiscal first quarter, which ended in October.
As I’ve written before, the lottery is simply a voluntary tax paid by those who cannot do math. The saddest part is that financial insecurity seems to be driving more people to play the lottery, which is the second-dumbest thing you can do with your money (buying carbon credits being the dumbest).
In the example provided by the AP, one gentleman pursues his dream by throwing away $5,200 a year on lottery tickets. “I imagine that I would be a heap better off if I saved this money, but everybody has dreams.”
Yes, you would.
The lottery is a voluntary tax on people who cannot do math
Ben Cunningham has linked to a story in The Buffalo News on the fact that the lottery there preys most heavily on the poor, which has been the conclusion on pretty much every study conducted on lotteries, including the Tennessee Lottery. I was opposed to the Tennessee Lottery from the start. I have never bought a ticket, and don’t plan to. Lotteries are nothing more than a voluntary tax on people who cannot do math — an insidious method devised by lawmakers to separate the taxpayers from even more of their money without officially having to raise taxes. Ironically, the same people (Democrats) who pushed for the Tennessee Lottery are the same ones who lament the regressive structure of our sales tax because the sales tax hurts the poor the most. So it is with the lottery. Remember, liberals may care about the poor, but when given a choice between helping government and helping the poor, Democrats will choose government every time.
If there’s any neighborhood where players are bound to lose at the lottery, it’s here, in the Broadway Fillmore section on Buffalo’s East Side.
Of the 20 census tracts in Erie County where lottery players fared the worst during 2007, 11 are in Buffalo. Six of those are in East Side neighborhoods that rank among the poorest in Erie County, including where Johnson buys his tickets.
It’s not that Johnson and others in this neighborhood have less luck at the lottery than those in wealthier areas.
They lose more because of the types of lottery games that are most popular, and therefore most available in these neighborhoods, according to a Buffalo News analysis, the first of its kind to trace the outcome of lottery tickets sold by individual retailers.
Ohio isn’t alone
Ben Cunningham posts some numbers relevant to Ohio’s lottery which show, once again, that lotteries prey primarily on the poor.
The most regressive tax ever devised by government
The lottery is a voluntary tax on those who cannot do math. That said, it is also the most regressive form of taxation that exists, because the lottery represents an upward transfer of wealth. This is ironic, because the lottery is supported most ardently by the same political party that wants to give us “tax reform” (replacing the sales tax with an income tax) because the existing tax structure is too regressive, and hits the poor the hardest.
Governor Bredesen wants to restructure the lottery scholarships, with less emphasis on merit and more emphasis on income. It’s difficult for me to not be ambivalent. I cast my vote back in 2002 against the lottery. My side lost. We have a lottery. I have never played our lottery – not once — and never will. So it’s not my money we’re dealing with here.
In covering this story, the Music City’s newspaper of record, the Nashville City Paper, points out some facts regarding current recipients of our HOPE scholarships:
According to state higher education figures for 2006, 47 percent of lottery scholarship awardees had family incomes between $36,001 and $96,000.
Twenty-five percent of lottery scholarship recipients had family incomes higher than $96,000 and 28 percent had incomes $36,000 or below for 2006.
It has also been pointed out in state after state that a disproportionate share of lotteries derive their incomes from low-income citizens. So Tennessee is not unique that our lottery represents an upward transfer of wealth from low-income players to middle-and-upper-class college students. That Democrats are more likely to support lotteries that Republicans illustrates that for all their rhetoric about helping the poor, Democrats don’t really care about the poor. They care about the government, and any program or institution that enables Democrats to empower the government takes precedence over “helping the poor.”
It has been six years since Tennessee voters approved the lottery, and we are just now finding a Democrat leader (Phil Bredesen) who actually advocates changing the program to enable low-income students to receive more of the lottery proceeds than they are currently getting. That’s all well and good, but it will not change the fact that the lottery preys primarily on those who can least afford to play.
Hades ices over
Tennessean columnist Dwight Lewis and I agree on something. In his op/ed yesterday, Lewis takes on the Tennessee lottery using much the same arguments I have used to take on the lottery.
If that wasn’t bad enough, Harper pointed out to me that there were some other troubling facts, such as:
Students from families earning over $96,000 retained their lottery scholarships 63 percent of the time.
Students from families making less than $12,000 annually retained the awards at a 42 percent rate.
African-American students represent only 8 percent of scholarship recipients even though they are 19 percent of the public postsecondary population. And that is in the 2003 group. This gap has widened since then.
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Her constituents, Harper said, “can choose to continue to play the lottery and send wealthy kids to college or take those dollars and invest in their children. As a general rule, where you make a financial investment, you expect to get some positive results. In this case, when poor people play the lottery, they are not making investments in their children.”
We lottery opponents told you it was going to turn out this way.
Best one-liner on the lottery I’ve ever heard
State Senator Thelma Harper and I probably don’t agree on a whole lot. But we do agree on the lottery, and her one-sentence descriptor that “Poor people are paying for rich kids to go to college” is one I’ll be using in the future.
The lottery netherworld
Several days ago, I took my son to a bowling alley on the far eastern side of Davidson County. While we were paying for our games, I noticed that an individual ahead of us was buying lottery tickets. That was nothing new. I’m often behind saps in line at the convenience store doing the same.
I don’t know if the lottery player at the bowling alley was, to put it nicely, mentally challenged, but rather than speak to the cashier, he simply pointed to the various lottery tickets he wanted. When it came time to pay, he appeared to empty his pockets of cash and dropped a handful of wadded-up bills on the counter. It was a rather odd transaction. I don’t want to get into stereotypes regarding public assistance, because I don’t know for sure. I’m just reporting what I saw.
At any rate, I wish that those who advocated the lottery, such as Congressman Steve Cohen, those who administer the lottery, and those who praise the lottery because it is “for education” could go to places where lottery tickets are sold and see some of the people the lottery preys upon. Perhaps they do. Perhaps, deep inside, they are bothered.
I have never played the Tennessee Lottery, and am committed to never playing it. The way I see it, the lottery is a voluntary tax on those who cannot do math. No dollar of mine will ever go into that netherworld. I am and always have been a critic of the lottery, and have published four op/eds in the Lebanon Democrat (one of which also appeared in the Tennessean) on the lottery.
The Nashville City Paper ran a story today that further damages the credibility of the Tennessee Lottery. The headline, “Lottery scholarship retention levels dropping,” says it all. Here are some facts:
* Half of all 2005 freshman lottery scholarship recipients had lost their awards by 2006.
* Students from lower income households tend to lose scholarships at a higher rate than students in higher income families.
* Forty-seven percent of students lost scholarships at four-year colleges, 65% at two-year schools, and 36% at independent colleges.
* Recipients of the General Assembly Merit Scholarship (a $1,000 supplement to the $3,800 HOPE scholarship) had the highest retention rate — 89%.
* Recipients of the ACCESS scholarship (a $2,650 grant for a four-year institution), were at the lowest retention rate — 11%.
* More than 56,000 students received lottery-funded scholarships for the 2005-06 academic year, with total awards in excess of $136 million.
The fact that sticks out most is that students from lower income households tend to lose scholarships at a higher rate than students in higher income families. In my last op/ed on the lottery, “Lottery is a regressive tax,” which appeared last April 25, I noted that:
An analysis of 2005 lottery data conducted by the Chattanooga Times Free Press shows just who that money is going to. In Hamilton County, for example, the average lottery scholarship recipient comes from a family with an annual income of $71,980. The median household income in Hamilton County is $38,930, according to the U.S. Census Bureau.
But Hamilton County is not an anomaly. In the state’s poorest county, Hancock, lottery scholarships go to recipients whose families make, on average, $34,146. The median household income there is $19,760. In Grundy County, another relatively poor county, where the median household income is $22,959, the average lottery scholarship recipient comes from a family that earns $40,540.
I hate to say that we lottery opponents told you so, but we told you so.
In his newsletter dated April, 1999, Focus on the Family founder Dr. James C. Dobson noted that “Lottery advocates are incredibly crafty and manipulative of the public. They link state-sponsored gambling programs to funding for education, which dupes people into believing that buying a ticket will somehow benefit children. It is a lie.”
Dobson noted that Georgia’s lottery, whose HOPE scholarship program provided the template for the Tennessee model, “sells $250 of tickets per person in poor neighborhoods compared to less than $100 per capita in affluent areas. Meanwhile, the average family income of Georgia residents receiving HOPE scholarships is $13,000 higher than the state average! No matter how proponents attempt to dress it up, the governmental sponsored lottery continues its shameless exploitation of the poor.”
…
Yes, the Tennessee Lottery has raised a lot of money for scholarships, but has it really been worth the cost? While we lament “tax cuts for the rich” and a regressive sales tax that “hits the poor the hardest,” the state government, at the behest of the voters, has sanctioned a program that exploits the poor far greater than any system of taxation. And all we can do is rejoice over what the lottery has done for relatively well-off college students.
And now we learn that lottery scholarship recipients from lower income families are more likely to lose their scholarships than those from higher income families — a fact that steepens the lottery’s upward transfer of wealth. But that sales tax on groceries sure is immoral.
Be careful what you ask for
The Tennessean expresses its dismay over the large bonuses some lottery executives are getting. I personally don’t have a vested interest in this cause, since I have never played the Tennessee Lottery and never will. But I have to admit that I have to sit back with some measure of satisfaction whenever reading a hand-in-the-cookie-jar story about lottery executives, because we lottery opponents were right all along.
If Tennesseans are upset about the bonus plan, that’s tough. The lottery is designed to operate as a quasi-private entity, and the board has every right to establish the pay process as it sees fit. Howls of protest won’t matter. But criticisms that the projections are so small that bonuses are almost guaranteed are justified.
It’s constantly telling that state Sen. Steve Cohen, D-Memphis, who worked feverishly for years to establish the lottery, has been a persistent critic of the executive pay. Cohen has the most rightful claim of anyone to celebrate the lottery’s success, but he says the bonuses are excessive and shouldn’t be necessary to get good work out of the lottery executives.
Conservative estimates made sense early in the lottery’s existence, because it was an unproven program. But the lottery is well established now, and instead of being true incentives, the bonuses look like easy money. Those hefty bonuses could pay for quite a few scholarships, which were the impetus for getting the lottery launched. The odds are mighty favorable for a lottery exec.
But it’s all for education, right?
Positive feedback
Wow! The e-mail response to my Nashville Eye column today on the lottery has been 100% positive thus far. I always get at least one piece of hate mail. It’s almost a disappointment. (Please don’t send me any hate mail just to ruin my perfect record.) Here’s what I’ve received from readers so far:
I read your comments on the lottery. I liked it very much. My feelings have always been that the money should be dispersed to all people who qualify for college, not on grades, but on economic need. Get accepted, don’t have the money, we dip in the lottery pool and give you a hand up.
Great job on your write up, thanks for taking the time to share.
B.W.
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Excellent article on the lottery in today’s paper, Mark. The only thing I would add: how can we educate the poor so that they don’t waste their money on gambling?
Thank you for your thoughts.
L.B.
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Was that your editorial in the Tennessean? If so – good job – well stated. If not – well, then there is a really good editorial in the Tennessean by a guy with the same name as you.
Best-
N.G.
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Great article today in the Tennessean!
J.J.
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You are so right. The liberals call me a conservative and the conservatives call me a liberal. The whole thing is that I am sick and tired of the public servants and special interest groups thinking that I am stupid. I am writing my congressman concerning the NO ETHICS BILL they are attempting to pass. I urge you to do the same.
L.L.
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AMEN!
As a former Memphian, I watched in disgust as casinos held paycheck contests, which you could only enter by cashing your paycheck at the casino. I watched our probation caseloads go up as people turned to theft, embezzlement (even a vice president of a bank!) to fuel gambling addiction. Now we have our own government acting reprehensibly selling false hope to those who can least afford it.
I’ve also just stood by and shook my head in dismay as a dear friend, a college-educated intelligent person temporarily down on his luck after losing his job and being unemployed for several months, spent $5 a week from his unemployment checks on lottery tickets, while his bills went unpaid. The rationale was there wasn’t enough money to pay them anyway, and if by some miracle he won, it would solve all his problems.
You are so very right. I am and have been disgusted with our own government sponsoring this. They may as well make meth!
K.S.
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I really enjoyed your article slamming the lottery. I read it very quickly this morning, didn’t have time to really look closely. There’s one point re: the regressiveness of the lottery I don’t remember seeing. Those who benefit from it (besides the few prize winners), i.e., the relatively well-off college-grantees and their parents, are probably the least likely, presumably, to buy tickets. They appreciate the futility of a game which has one winner and millions of losers (in addition to some undisclosed numbers of little winners, who are given a tantalizing little bit to keep them losing on a more regular basis).
I guess I’m one of the losers who voted against it, but would be interested in any efforts to better spend lottery proceeds in the manner you advocate. Please let me know if you know of any such efforts I might be able to keep up with. Thanks.
J.R.
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Excellent article. The lottery is the most wasteful, most regressive, and most stupidly spent tax that is imaginable. It takes from the poor, skims a lot off the top and gives much of the rest to people who don’t need it. I have friends who make more than $100,000 a year who were having no problem paying for their children’s education…but were happy to get a bonus from the lottery fund which reduces their cost and allows them to take a more expensive vacation this year.
G.R.
I am humbled.
UPDATE: There’s more.
Thanks be to God for the great work you did on that piece! Thanks also to The Tennessean for its willingness to publish it. In a cavalier disregard of all the copyright laws, I’m going to make several copies at Kinko’s to pass around.
D.L.
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You did a great job with the article in the paper. Congratulations!
Blessings
B.
And one state senator wrote:
Great editorial today!
You only forgot one thing and that is that with the lottery and the millions being spent on it, we are not collecting sales tax that we would have collected had people spent that money on something else.
When I was arguing against the lottery I used an article that I believe Bobbie Patray [Tennessean Eagle Forum] gave me about Jesse Jackson saying that people in the poor neighborhoods spent the most on lottery tickets. I can remember telling the committee that Jesse Jackson and I could finally agree on one thing, that the lottery is bad for the poor neighborhoods.
I plan to copy your editorial and place it on every senator’s desk in the morning.
UPDATE: There’s even more today.
Yes, David Ramsey has been saying that for years. The lottery is a “tax on the poor” because those zips buy most of the tickets. This is the result of poor administrating by the governors/legislatures in this country-they can avoid the issue of taxes and spending by starting a lottery. The poor are there mostly because of poor choices by them or their parents and some bad luck. I am afraid it will always be thus.
Good column,
B.
Updated on May 9:
Just to say that I appreciated your article in Nashville Eye in the TENNESSEAN. I think we knew from the begining that there would be fraud and lottery money would often go to recipients who are less than needy. It seems that some of the money should go into helping the poor get off to a good start from Kindergarten. Salaries and bonuses seem to be beyond reason. I voted against it and have not bought a lottery ticket.
JWM
Today’s Nashville Eye column in the Tennessean
“School funds raised by Tennessee Lottery come at a high cost,” by Mark A. Rose.
Today’s Lebanon Democrat column: “Lottery is a regressive tax”
The Tennessee Lottery set a sales record during the first quarter of 2006. Net sales were reported at $265.9 million for the first three months of the current year, bringing total sales for the Tennessee Lottery to $1.9 billion, $567 million of which has gone to education, nearly all of that for college scholarships.
Say what you want about the lottery being for education. There’s a lot more to this story than the bottom line.
An analysis of 2005 lottery data conducted by the Chattanooga Times Free Press shows just who that money is going to. In Hamilton County, for example, the average lottery scholarship recipient comes from a family with an annual income of $71,980. The median household income in Hamilton County is $38,930, according to the U.S. Census Bureau.
But Hamilton County is not an anomaly. In the state’s poorest county, Hancock, lottery scholarships go to recipients whose families make, on average, $34,146. The median household income there is $19,760. In Grundy County, another relatively poor county, where the median household income is $22,959, the average lottery scholarship recipient comes from a family that earns $40,540.
I hate to say that we lottery opponents told you so, but we told you so.
In his newsletter dated April, 1999, Focus on the Family founder Dr. James C. Dobson noted that “Lottery advocates are incredibly crafty and manipulative of the public. They link state-sponsored gambling programs to funding for education, which dupes people into believing that buying a ticket will somehow benefit children. It is a lie.”
Dobson noted that Georgia’s lottery, whose HOPE scholarship program provided the template for the Tennessee model, “sells $250 of tickets per person in poor neighborhoods compared to less than $100 per capita in affluent areas. Meanwhile, the average family income of Georgia residents receiving HOPE scholarships is $13,000 higher than the state average! No matter how proponents attempt to dress it up, the governmental sponsored lottery continues its shameless exploitation of the poor.”
Indeed, we knew this before the lottery was ever created in Tennessee. State Representative Tommie Brown (D-Chattanooga), along with other members of the Black Caucus, has criticized the lottery scholarship program for not helping enough minority and low-income students. She concedes that lawmakers knew when they approved the Tennessee Lottery two years ago that it would cater more to well-off students.
“We know that young people who come from higher-income families, whose parents tend to already have college degrees, are those young people who are going to excel and do best,” she notes. “[Lower-income students] are not the best-prepared young people, so they are not going to score the highest.”
In other words, the Tennessee Lottery, just like Georgia’s HOPE scholarship program, represents a transfer of wealth upward from low-income Tennesseans to high-income Tennesseans. Ironically, those who are most critical of Tennessee’s regressive sales tax system also tended to be advocates of the lottery during its creation, even though the lottery is far more regressive than our tax system.
Dr. Dobson was right, though. Lottery advocates are crafty and manipulative. If you’ve ever seen lottery commercials on TV or heard them on the radio, you know how glamorous playing the lottery can be. At least, that’s how the advertisers pitch it. Why, you can even give lottery tickets as Mother’s Day presents and Christmas stocking stuffers. Of course, it’s all for education. Just look how happy the scholarship recipients are, as well as the smiles on the faces of those who have bought winning tickets.
I wish the lottery advertisers would show the dark side of the lottery. For once, I’d like to see a commercial showing a man who already can’t pay his bills heading down to the local Mapco to spend $20 on lottery tickets. Or how about the image of a little boy wearing stained clothes while his mother stands behind him holding a fistful of tickets?
Here’s where conservatives could challenge the lottery system. You and I know the lottery is here to stay. That being the case, the lottery could do far more for education if a portion of that money, let’s say half, were redirected into voucher programs for those in low-performing public schools. It would require another constitutional amendment, but if we’re going to have a lottery, then we may as well try to make it as effective as we can.
Yes, the Tennessee Lottery has raised a lot of money for scholarships, but has it really been worth the cost? While we lament “tax cuts for the rich” and a regressive sales tax that “hits the poor the hardest,” the state government, at the behest of the voters, has sanctioned a program that exploits the poor far greater than any system of taxation. And all we can do is rejoice over what the lottery has done for relatively well-off college students.
Upward transfer of wealth
Pretty much every piece of news that has come out regarding the Tennessee Lottery has had me in stitches. For the record, I have never played the Tennessee Lottery, and don’t plan to. The lottery, after all, is simply a voluntary tax on people who can’t do math. Well, Kleinheider points out that in Hamilton County, Tennessee, “the average student with a lottery scholarship comes from a family that makes $71,980 a year, compared to the $38,930 median household income the U.S. Census Bureau reports for the county.”
Kleinheider editorializes that “This seems to happen with many government programs. Affirmative Action was designed with the hope that the poor and underclass blacks would get a leg up when, in fact, it has been African-Americans already among the affluent who benefit the most while those of more meager beginnings continue to be left behind.”
He’s pretty much right.
Hamilton County isn’t the only place where this happens. We knew of this upward transfer of wealth even before the Tennessee Lottery came along. In fact, in a newsletter back in April, 1999, Dr. James Dobson noted that:
Lottery advocates are incredibly crafty and manipulative of the public. They link state-sponsored gambling programs to funding for education, which dupes people into believing that buying a ticket will somehow benefit children. It is a lie. School support rarely increases after lotteries are sanctioned because state support is then withdrawn. The one exception so far is the Georgia lottery’s HOPE scholarship program, which pays college expenses for certain students. But even in this instance, the Georgia lottery sells $250 of tickets per person in poor neighborhoods compared to less than $100 per capita in affluent areas. Meanwhile, the average family income of Georgia residents receiving HOPE scholarships is $13,000 higher than the state average! No matter how proponents attempt to dress it up, the governmental sponsored lottery continues its shameless exploitation of the poor.
Funny, this is one government program that really does take from the poor and gives to the more affluent, and the left has nothing but praise for the lottery.
UPDATE: The Tennessean has a related story.
Yesterday’s Lebanon Democrat column: “Lottery is regressive”
If more people understood the math behind lotteries, there would be far fewer tickets sold. Some do know the math, and choose to play anyway. But some don’t know the math, and play because they honestly believe they are going to win a huge jackpot that will change their lives. The latter is perhaps the lottery’s saddest story.
Minority Wealth Magazine did a survey earlier this year, and discovered the following:
“A larger percentage of men questioned noted they felt playing their state lottery was the best way to build wealth, as compared to women. …[Forty-eight] percent of minority men preferred playing the lottery in lieu of savings as a financial design, compared to 41 percent of minority women surveyed.”
It looks like someone got some bad financial advice. According to the Tennessee Lottery, the odds of winning the Powerball jackpot are 1-in-146,107,962. The odds of winning even the $200,000 prize are 1-in-3,563,609, while the odds of winning $10,000 are 1-in-584,432.
Let’s say a person puts $50 a month into Powerball tickets. He does this for 30 years. He will have “invested” $18,000 in the lottery. Since each ticket produces a 1-in-146,107,962 chance of winning, the odds of his winning the Powerball jackpot at any one time during that 30 years are still 1-in-8,117. Even his odds of winning $10,000 are 1-in-32. And that’s after buying 18,000 lottery tickets. But investing $50 per month for 30 years at 5% interest would give that person a 1-in-1 chance of ending up with $41,612.93.
To put this into even better perspective, you could buy 50 Powerball tickets a week and win the jackpot once every 56,000 years.
If you bought a ticket for every mile you drive, you’d have to make the equivalent of 300 round-trips to the moon before winning.
If you buy one Powerball ticket, you’re 27 times more likely to be killed by a wasp, hornet, or bee sting in the next year than you are to win the jackpot.
But there is one institute whose odds of winning the Powerball jackpot are 146,107,962-in-146,107,962. It’s the Internal Revenue Service. The Southern Standard out of Des Moines, Iowa reported just last month that the federal government has netted at least $2.85 billion since the first jackpot was awarded in 1988.
And we were told it was for education. Well, some of it is, but not as much as you’d think.
Take, for instance, a casual player who puts in a hundred bucks a year, wins nothing, but placates himself with the justification that “it’s okay, because that money went to education.”
In truth, only about a third of the money that gets put into the lottery comes out for education. The rest goes toward prizes and administration. Thus, a person who puts $100 into the lottery is only sending $33.33 toward education.
Finally, a December 4 article “The high price of a dream” that appeared in The Star-Ledger out of New Jersey reported that lottery ticket sales rise as income falls. Put another way, the lottery is regressive.
The Star-Ledger compared lottery sales and winnings with income levels based in 577 zip codes across New Jersey between 2000 and 2004. It found that per-capita ticket sales were much higher in lower-income zip codes. For example, in communities with average household incomes below $52,000, the lottery sold an average of $250 in tickets per person per year — more than twice the amount for zip codes with $100,000 households.
This is certainly not the first study that reveals the predatory effect the lottery has on lower income citizens. And there’s no reason to suspect that trend is any different in Tennessee.
Indeed, the false promise of hope and the disingenuous argument that “it’s for education” have sugar-coated a government-endorsed industry that exploits those among us who can least afford it. But you don’t need me or a bunch of studies to prove the lottery is a bum deal. All it takes is a little math.
I wonder if it’s the same in Tennessee
Ben Cunningham points to story from The Star-Ledger out of New Jersey regarding their lottery. Here’s the meat-and-potatoes:
The Star-Ledger analyzed five years of lottery data by ZIP code, obtained through the state’s Open Public Records Act, and found a consistent and undeniable pattern: Lottery revenues (ticket sales) rise as income falls. This is particularly true for its bread-and-butter money-makers — the Pick 3 and Pick 4 drawings and instant games.
Put another way, the lottery is a regressive form of taxation.
The Star-Ledger compared lottery sales and winnings with income levels based on Census data in 577 ZIP codes in New Jersey between 2000 and 2004. Among the findings:
– Per-capita ticket sales were much higher in lower-income ZIP codes. In communities with average household income below $52,000, the lottery sold an average of $250 of tickets per person annually. That was more than double the amount for ZIP codes with $100,000 households.
– There are more lottery retailers per capita in lower-income areas. Bayonne, where the average income is $58,971, has one outlet for every 750 residents; Princeton, with an average income of $134,638, has one for every 5,450 residents.
So why isn’t the left, which cares so deeply about the poor, outraged over this?
The lottery and math
I’m just now getting around to reading Glen Dean’s post from yesterday entitled “The Lottery Is For People Who Are Bad At Math.” Dean’s headline reminded me of one of my random ideas from back on May 21, 2004: “The lottery is a voluntary tax on those who cannot do math.”
And now, the math.
First, Minority Wealth Magazine did a survey earlier this year, and discovered the following:
A larger percentage of men questioned noted they felt playing their state lottery was the best way to build wealth, as compared to women. Although the non-retirement savings response levels between the genders was even, 48 percent of minority men preferred playing the lottery in lieu of savings as a financial design, compared to 41 percent of minority women surveyed.
Looks like somebody got some bad financial advice. According to the Tennessee Lottery, the odds of winning the Powerball jackpot are 1-in-146,107,962. The odds of winning even the $200,000 prize are 1-in-3,563,609, while the odds of winning $10,000 are 1-in-584,432.
Let’s say a person puts $50 a month into Powerball tickets. He does this for 30 years. He will have “invested” $18,000 in the lottery. Since each ticket produces a 1-in-146,107,962 chance of winning, the odds of his winning the Powerball jackpot at any one time during that 30 years are still 1-in-8,117. Even his odds of winning $10,000 are 1-in-32. And that’s after buying 18,000 lottery tickets. But investing $50 per month for 30 years at 5% interest would give that person a 1-in-1 chance of ending up with $41,612.93.
Today’s Lebanon Democrat column: “Lottery fuels greedy hands”
It has been said the Tennessee lottery has produced its first winner, and the first ticket has yet to be sold. Her name is Rebecca Paul, and she has been imported from Georgia to run Tennessee’s copycat lottery. Her base salary is $350,000, but she stands to earn an additional $402,500 in bonuses. In addition, Paul has brought three of her fellow Georgians to serve as senior managers, each hired at salaries of $180,000, plus yet unspecified bonuses. Paul’s recklessness prompted even Governor Bredesen to publicly chastise the lottery chief for both stacking her team with Georgia friends and the exorbitant salaries.
These salaries are far above those paid to administrators of competing lotteries. Rebecca Paul was paid $500,000 last year, including bonuses, to run the Georgia lottery. The four largest lotteries in the nation, New York, Massachusetts, Texas, and California, generated an average of $3.715 billion in gross revenue. Their directors earned an average of $119,000 last year. The Tennessee games are expected to generate around $900 million the first full year, and we are paying our director a base salary of $350,000.
The shenanigans have not gone unnoticed by some of our legislators, either. A letter to the governor drafted by 19 Republican senators and representatives, including Wilson County’s Susan Lynn, expressed their own dissatisfaction at the very liberal distribution of administrative salaries being funded by a lottery that is supposed to exist on behalf of education. The letter asks, in part, “Now we call on you to use the authority you requested to right this ship before it spins out of control. We stand ready to help you restore our constituents� faith that the lottery is being run for the benefit of students across the State of Tennessee.”
There are obviously more than a few Tennesseans, even some who voted for the lottery, who have expressed dismay at the Georgia pipeline and the Hollywood salaries. Well, what did you expect? This is the gaming industry, inherently unscrupulous and corrupt. When the voters approved the lottery last November, they opened the door to corruption. That corruption is already becoming manifest should surprise no one.
Here’s another pill to swallow. Counterfeit lottery tickets are popping up. At least one convenience store in west Tennessee is selling its own brand of lottery ticket. Said one clerk, “it is kind of our own lottery.” Indeed, the potential for fraud is ripe. Under the forthcoming system, outlets will be paid 6.5 cents per dollar ticket sold. But the temptation to sell fake tickets in order to pocket the entire dollar will undoubtedly yield more corruption, and nothing for education.
Regardless of how honorably our governor and lawmakers intend to administer the Tennessee lottery, there are already a swarm of greedy hands eager to reach into the $900 million cookie jar. Big money contracts to lottery vendors have yet to be awarded. There are the administrative costs which are already being escalated by the highly paid Georgia dream team. And there are payouts to lottery “winners” that must be distributed from time-to-time. What is left — about one-third of gross revenues — will go to scholarships.
Indeed, Tennesseans approved the lottery because the “education” crusade seemed to make it palatable. It is now becoming apparent that scholarships for the “best and brightest” merely provided the vehicle by which the gaming industry has stormed into Tennessee in order to extract as much money as possible from its citizens under the false hope of “becoming a winner.”
Today’s Lebanon Democrat column: “Lottery needs to be fair, helpful”
I voted against the lottery. I thought it was a bad idea, and I believe over time an increasing number of Tennessee voters will regret having removed the constitutional ban on gambling. But, being a faithful citizen of this republic, I respect the concept of government of the people, by the people, and for the people. We all draw the short straw at one time or another.
It has been interesting to see the groundwork for the inevitable lottery being laid. Not surprisingly, there has been a great deal of bickering among various legislators and the governor over the lottery. And, of course, the gaming industry has flooded the State Capitol with a small army of lobbyists attempting to win huge contracts from the state.
The father of the impending Tennessee lottery, Senator Steve Cohen, has been very territorial of “his” legislation. Cohen has grown very impatient while wrangling with various legislative committees and the governor. It seems he expected to walk in the first day and run his legislation through the general assembly and be done. It has not been quite so easy, and I applaud our legislators for scrutinizing every aspect of this new system.
To summarize, some want to give more scholarship money to students attending state universities; some want to give equal money to those enrolling in private colleges. Some want to set the scholarship threshold for high school graduates at a 3.0 GPA, some want to lower that to 2.5, while others want to base the criteria on ACT scores. Some want to grant scholarships only to those students whose family income is below $100,000, while some want no income cap.
Some want to commit the scholarship funding immediately; some want to wait until next year in order to better gage just how much money there will be.
Some want to allocate a portion of the revenue to capital projects and pre-kindergarten programs with the initial legislation, while others want to wait and see how much money is left over.
Notwithstanding, I have a few recommendations of my own.
1. The scholarships should be based on ACT scores. To use high school GPA as a litmus test creates at least three problems. First, it encourages grade inflation. Second, not all 3.0 GPA’s are equal. Third, using GPA’s disenfranchises home-schooled students. Using the standardized ACT to determine qualifications eliminates these problems.
2. Scholarships given to students attending private schools should at least be equal to those for students attending public universities. We should, in fact, encourage students to frequent the state’s private colleges. Don’t forget that for every dollar a student pays in fees at one of our public colleges, the taxpayers chip in approximately two. The proposed $4,000 scholarships would cover the cost of in-state tuition and books for one student, but it would leave exposed the much larger cost borne by the taxpayers. Therefore, scholarships should really be increased to around $12,000 per year to cover the total cost of higher education. However, given that most scholarship recipients would likely end up in our colleges regardless, I’ll let that one slide.
3. Scholarships should be adjusted for inflation each year.
4. There should be no income cap. If the state is willing to accept lottery proceeds from those families with six-figure incomes, then it should be just as eager to award scholarships to the children of those families.
5. We should wait until after the lottery has been in place for several months before determining how much money to commit. The legislature has a very poor track record in making accurate budgets from revenue estimates. There is every reason to believe an inflated revenue estimate will find the state over-committed, leaving a huge vacuum for — you guessed it — the taxpayers to fill with non-lottery dollars.
6. The state should allocate only those scholarships which it can adequately fund from year-to-year. Some already want to turn the scholarship program into an entitlement, and the last thing Tennessee’s taxpayers need is another TennCare. So when the novelty of the lottery wears off in a few years, and proceeds dwindle, the number of scholarships awarded should be trimmed proportionally. Tennessee was sold on the Georgia model, but one thing lottery supporters failed to advertise is that Georgia has over-committed its scholarships, and now has to dip into it’s K-12 money to fund the leftovers.
7. While I do not believe government should ever mingle in pre-kindergarten education, I do believe funding capital projects is a worthwhile idea, and I would like to see a portion (perhaps 25%) of the lottery “profits” spent on replacing some of the Mt. Juliet Elementaries across the state.
Initial estimates suggest the state will see around $300 million in lottery proceeds the first full year (after payouts and overhead). Lopping $75 million off for capital expenditures leaves $225 million. Assuming an initial value of $4,000, the state could fund approximately 56,250 scholarships. (To put this figure into perspective, the Tennessee Board of Regents reported 52,199 full-time students attending the state’s various four-year public universities in its 2000 University Enrollment Profile.)
However, let’s say that in five years that $300 million figure falls to, say, $200 million. Again, skimming 25% off the top for capital projects would then leave enough funds to provide 37,500 scholarships (and this assuming no inflation adjustments). So the state is going to have to be extremely careful to avoid committing the taxpayers to an entitlement for which we did not vote. Also, beware the temptation on the part of our legislators to try to open up new avenues of gambling in order to boost sagging lottery proceeds.
Again, I’m not thrilled to be writing such a column, but if we’re going to do a lottery, then let’s apply the proceeds fairly, objectively, and responsibly. We should award the “best and brightest” on merit, not income, and not on phony grades. And the state should never ask one dime from the taxpayers to meet the commitments the lottery is about to create.
