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:
South 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.