The Lottery: Government Sanctioned Gambling Preying on the Poor
“Give me 964 on $1 three times, and 741 on 50/50 twice.”
She called out the numbers as naturally as she would while giving out her phone number. And she kept going.
I watched as she purchased $40 worth of lottery tickets on a blustery Friday night at the gas station where increasingly impatient customers just wanted to get gas. And as I watched, I couldn't help but realize what I was witnessing before my eyes: the propagation of poverty.
The statistics on lottery spending are hard to fathom. One article reported that in 2014 Americans spent more on lottery tickets than they did on sports tickets, books, video games, music, and movie tickets – combined! That trend was repeated in 2016. And Forbes reported that America, as a country, spends more on lottery tickets than we do equipping our military.
The single state that spends most on lottery tickets is Massachusetts at an average of $735 per person. My home state of Maryland spends approximately $355 per person. And what is hard to ignore about the states in the top 10 for lottery spending is that at least 7 of them are considered liberal states controlled by Democrats.
What is the lottery?
The simplest way to understand the lottery is as a tax. It is a regressive tax on predominantly poor or lower income people. Essentially, the lottery is state/government sanctioned gambling. A state might outlaw back room gambling, or odds betting on sports and horses, but they gladly sanction gambling through the lottery (and casinos) because of the massive revenue stream they receive through the sale of lottery tickets. We quickly learn that states don't actually have a problem with gambling, they just want their cut of the profits.
The lottery, then, is nothing less than another tax enacted by the government on (sometimes) unsuspecting people. And though the lottery is a voluntary tax, it is often pushed by media hype as the growing jackpot becomes a focal point of the news. And though studies have long-shown the financial damage caused by the lottery to lower-income people, this tax doesn't appear to be going away anytime soon. The government is not likely to end such a large revenue stream. So the preying goes on.
An article at VOX shares at least 4 ways the lottery preys on poor people. In this well-written and in-depth analysis of lottery ticket purchases, the article notes that most tickets are bought in poor neighborhoods, and these neighborhoods have a high minority population. Additionally, the Vox article says that many people believe the lottery is the only way to accumulate a large amount of money. This is more an act of desperation than anything else.
Returning to the lady in line buying $40 worth of lottery tickets, some quick analysis reveals her financial mistake. If she spends $40 per week on lottery tickets, she will spend $160 per month. This means she will spend approximately $2,000 annually on the chance of winning millions, while losing thousands. What could this money do for her if properly used? Some things she could do include:
-Putting $2,000 into a college 529 account for her children's education. Doing this annually for even a few years can help with college education costs. Doing this also provides (in most states) a state tax deduction.
-In most cases, $2,000 annually can provide a significant amount of life insurance and even disability insurance for a married couple. Barring significant health concerns, this amount would sufficiently protect a family from loss through insurance.
-$2,000 annually could provide most, if not all of the monthly payment needed to purchase a new car. It might not be a Mercedes, but a modest car can be obtained for less than $200 per month (with good credit).
-By putting $2,000 per year into a Roth IRA, a significant retirement nest egg can be established. Since this is the best way to accumulate tax-free funds for retirement it is an excellent option for people to utilize.
These are just a few of the many ways $2,000 per year can make a significant difference in the financial life of an individual. We could talk about the ability to avoid debt during Christmas, enjoy a cash-paid vacation, or have a well-funded emergency fund. Christmas and vacation debt, along with debt due to the curves life throws our way are all common financial mistakes people make. And yet, rather than making sound financial decisions to avoid these mistakes, many people are playing the lottery.
There's an element of moral accountability here. The government is deliberately doing something that is destructive to its citizenry, for profit. The government is allowing people to use already taxed money to buy a lottery ticket only to take a cut of those ticket sales. In essence, this is a self-imposed double tax that many people eagerly engage in.
Some will claim the lottery is good because so much of the earnings go towards education in each state. This claim is not legitimate. Whatever small amount of good comes from the sale of lottery tickets is offset by the financial ruin perpetrated on already struggling families.
If the government finds good reason to outlaw an individual running a sports betting operation out of his house, or loan sharking, or back room card games that are “off the books,” the lottery should also be outlawed. The same people are being preyed upon in each of these scenarios.