South Dakotans Spend Triple Nat’l Average Per Capita on Lottery

The July/August edition of the Aberdeen Chamber’s Progress magazine (not online yet, but someday…) includes an essay from NSU business dean Bill Broucek on gambling and lotteries. He cites North American Association of State and Provincial Lotteries data and a May 2015 Atlantic article by Derek Thompson showing that Americans spent $70.1 billion last year on lotteries. Thompson notes that lottery spending in the 43 lottery-legal states is more than the spending in all 50 states for “sports tickets, books, video games, movie tickets, and recorded music sales.”

South Dakota’s lottery sales in FY 2014 totaled $645 million. Dr. Broucek observes…

…that’s almost 24 times those of our North Dakota neighbor. On a per capita basis, however, the numbers are astounding. South Dakotans averaged $755 per person on lotteries last year, second only to Rhode Island [Bill Broucek, “Lotteries: Where Does South Dakota Sit?” Progress, July/August 2015, p. 22].

Thompson bar-graphs per-capita lottery spending for the top five and bottom five states:

Screen Shot 2015-07-08 at 9.00.33South Dakotans are spending three times more per capita on lotteries than the average American. Two thirds of that money is redistributed randomly via prizes (and really, random redistribution of wealth must be at least as morally offensive as the worst socialist scheme). Retailers get a sixth for the privilege of running this scheme. The state takes the remaining sixth of this voluntary tax, $106 million in FY 2014.

And as Broucek notes, the state is likely harvesting that voluntary tax revenue disproportionately from poor people:

Lottery researchers are in agreement that poorer people tend to disproportionately make up a large share of the market. Peter Moran in a scholarly article quotes a Duke University study which concluded that the poorest third of households purchased more than half of the lottery tickets sold. A 2000 study by Welte and 4 colleagues found that those in the lowest fifth by socioeconomic status spent an average of $400 annually whereas those in the highest fifth by socioeconomic status spent an average of $176 per year. High school dropouts spend four times as much on lotteries as college graduates. The North Carolina Policy Watch reported that its state’s poorest counties were its biggest lottery purchasers [Broucek, 2015].

Broucek looks objections to such regressive taxation squarely in the eye and says, “I’m not a moralist. If you wish to pay extra tax, that’s your decision.”

I’ll step to the plate and swing a little harder. Instead of letting $645 million of our wealth whirl away in an exploitative game that targets the poor and less educated while producing only $106 million for public goods, let’s shut down our lotteries. Let’s levy a corporate profits tax that would take more wealth from the richest folks who are hoarding a disproportionate share of our growth and redistribute it not to random winners’ pockets but to every child who benefits from a free public education. Let’s peg that corporate tax at  $202 million, the $106 million currently taken by the state via lottery plus the $96 million retailers get for running our statewide games of chance. That extra $96 million would give all of our 9,200 teachers just a shade over a $10,000 raise, a great advance toward paying a competitive wage that would fight our teacher shortage.

And we’d leave over $440 million in money currently wasted on lottery in South Dakotans’ pockets, which those South Dakotans could then spend on items of more lasting value. Our retailers could easily recoup their $96 million in axed lottery cash by retooling to meet that new $440 million worth of consumer demand, all of which we can tax for even more revenue for our schools.

We don’t need to put more video lottery into K-12 funding. We need to kick our gambling habit, take the “voluntary” regressive tax burden off the poor, tax South Dakota wealth fairly, and raise teacher pay.


12 Responses to South Dakotans Spend Triple Nat’l Average Per Capita on Lottery

  1. In impoverished communities, the lottery is the only way many see as a chance for bettering their lives. You add alcohol into the mix, and it gets even further blurred. The video lottery has made millions to the owners and has made Pierre a handmaiden for them, while leaving education, the supposed reason behind the lottery, in the dust bin. The state has created a bureaucracy that is dedicated to those chosen few that is the economic base for the corruption of our states political industry. Meanwhile, South Dakota competes with Mississippi for the bottom of the barrel. At the rate the republican regime directs, we soon will be under the barrel while more will be going to the industry that is truly a vampire that keeps getting bigger with more power.

    An income tax would be the most fair way of providing relief to our education system, it is time to do that for our future.

  2. Douglas Wiken

    Allowing and taxing gambling is just another way South Dakota taxes addictions…tobacco, booze, etc. And, then we just have to put a lot of the addicted into prisons which helps the prison industry which heavily contributes to “tough on crime” Republicans.

  3. US spent $162 billion on booze in 2011

  4. bearcreekbat

    When they consider what type of legislation might benefit regular folks in South Dakota our republican leadership seems to have a limbo attitude: “How low can we go?”

  5. Did Dean Broucek distinguish between actual South Dakotan spending on lottery vs. non-residents coming in & gambling? I don’t know if that data are available.

    In any event, I could probably get behind the idea of nixing the lottery and gambling revenue as it probably costs us more in social programs than it saves us via revenue.

    So we’d need to make up $106 million in our coffers. Maybe less due to less demand for social services. I can see creating a tax on businesses instead of raising our property taxes back to where they “should” be.

    But why, Cory, do you advocate levying more tax on businesses in the amount of what they would have made for lottery? If they’re not making that revenue, it doesn’t make sense to ask for that amount. It’s like taking away your income from working on bicycles and then demanding you pay what you would’ve made working on bicycles just because…

  6. “I could probably get behind the idea of nixing the lottery and gambling revenue as it probably costs us more in social programs than it saves us via revenue.”

    I’d love to see some data to back up this viewpoint, but I’m not optimistic that it exists.

    The reality is, if you outlaw gambling, then only criminals will gamble. Which means pretty much everyone becomes a criminal. I jest somewhat… but in the current world where we have access to the Internet on our phones and watches, trying to outlaw gambling is a losing proposition (pardon the pun).

    So we ban video lottery and scratch tickets for starters – do we think that will clean up all gambling? Sure it will stop some of it, but for the addicts that are the real problem… do you think they will simply stop? Not a chance. If they are close to a border they will seek their fix from other states. They will start gambling online – they will travel to the new and improved Indian casinos that sprout up when they realize they don’t need state approval to offer gambling, they will participate in a local poker game in the back room of the small town café.

    Yes people spend and waste a LOT of money on the lottery and on gambling, but should it be illegal or should the concept of personal freedom be more important than protecting the small number of individuals who become addicted to gambling from themselves?

    We can’t control everyone and we can’t force them to make good decisions. Outlawing gambling is much like trying to outlaw alcohol, tobacco, or sex. It won’t work – and people will find a way to get what they desire whether it is legal or not.

  7. Porter Lansing

    For some reason South Dakota calls slot machines a lottery game (it was first to do so). So do all the states but Massachusetts in the above graph. (MA is a much larger populated state which explains it’s third ranking). Other US jurisdictions which have legal video lottery include Oregon, South Carolina (formerly), Rhode Island, Delaware, New York, Ohio, West Virginia, Louisiana, Maryland, and Montana which include the remaining in the top five. This makes for an unfair comparison to the states with scratch tickets and a weekly drawing only.

  8. Bob Newland

    I grossed about $56k last year. I spent about $20k just getting to work and back home. I spent the rest foolishly. If I hit a number or six, I could retire.

    I don’t see anything foolish about the lottery, except buying a ticket.

  9. Bob. You are a corporate narc.

  10. Deb Geelsdottir

    I figure the chances of winning the big, multi-state lotteries is about the same whether you buy a ticket or not.

    Seriously, desperate people will try anything because they’re too desperate to worry about the stacked odds.