Steven Malanga vs. Ted Strickland’s Gambling Scheme
Here is a brilliant column from Steve Malanga of the Manhattan Institute. Too often, the gambling issue gets into a really exhausting moral debate a la Dave Zanotti and other Ohio political odd balls. But in this column, Malanga ignores that entirely, and hits foolish state gambling plans hard from an economic perspective:
You don’t have to be a moralist to recoil at this trend because expanding legalized gambling to close budget gaps is lousy fiscal policy. It siphons money out of the private economy just as tax increases do and hardly ever accomplishes what government advocates promise it will. Typical is the phony relationship between education financing and lotteries, which are often promoted to taxpayers as a painless way to boost public school spending or support other programs. “Sold to the electorate on the grounds that they will reduce taxes or provide better services, lotteries do neither,” concluded Thomas H. Jones, co-author of America’s Gamble, after a series of studies in the early 1990s. “They become one of government’s false promises.” Indeed, Jones and others have found that states with lotteries dedicated to education spend no more money proportionally on public schools than other states. Nor are taxes on average lower in such states.[...]
In fact, state-sponsored gambling may have a more harmful impact on a private economy than your typical tax increase, because government’s take is so high. The Tax Foundation, for instance, estimates that the implicit average tax rate of state lotteries is a whopping 43 percent because states pay out only half of the betting proceeds and spend about 7 percent of revenues to administer the lottery. Of course, few bettors understand that’s the payout/tax rate, which is one reason why the Tax Foundation argues that lotteries are bad fiscal policy–because they are taxes that lack transparency.[...]
And the effort succeeds disproportionately among the poor, something we’ve known for years. Back in the mid-1980s, for instance, one study estimated that adults making under $10,000 spent three times more per week on state lotteries than those earning $50,000 or more annually. Moreover, the study found that the burden was concentrated in 20 percent of households that gambled the most. Among those earning under $10,000 annually, the most frequent gamblers spent $35.66 a week, or $1,855 a year. Today, the pattern persists. Households earning under $12,500 a year spend five percent of gross income on the lottery, compared to one-third of one percent in households earning ten times as much.
Read the rest here.
Of course, none of this should matter from a libertarian perspective, as gambling probably should be legal, regardless of the effects. But big government statists like Gov. Ted Strickland are foolishly proposing to fill budget holes on the backs of the poor with proposals which already have poor track records in Ohio.