Cause for Concern (Lotteries)

Charles T. Clotfelter and Phillip J. Cook, Duke University professors and lottery experts, have done extensive research on lotteries. Their book, Selling Hope: State Lotteries in AmericaFirst Harvard University Press, 1991, provides a thorough exploration of the costs and benefits of state-run gambling operations –better known as lotteries.

On April 19, 2000, Clotfelter testified before the North Carolina House Select Committee and reiterated his concerns about state-owned gambling. Here are a few points he made in his testimony:

  • About 60 percent of adults in lottery states play at least once a year.
  • Middle-aged adults play more than the youngest or oldest adults.
  • The top ten percent of lottery bettors account for 65 percent of lottery revenues (indicating excessive gambling and possible addiction).
  • One conclusion is constant: Lower-income individuals spend a higher percentage of their income than those in middle and upper income brackets.
  • Among those who would be worse off [with a lottery] would be "problem gamblers," some of whom would have serious financial problems as a result.
  • Lotteries place a very high "implicit tax" on lottery purchases: For each dollar bet, the average state lottery pays 55 cents in prizes, spends 12 cents on retailer commissions and other operating costs and receives 33 cents for the state.
  • The implicit tax contained in lottery finance, no matter the rate, is regressive – where the percentage of income is highest from those at low income levels.
  • Through heavy marketing of lottery products, states compound this burden on lower income citizens and increase the social cost to problem gamblers.

According to a Tax Foundation researcher, Alicia Hansen, "The lottery is more than a controversial way to add a little money to state coffers; it is a tax and should be evaluated as such. When we subject it to the tests of good tax policy, it fails."

Hansen goes on to say, "Lottery proponents argue that a tax is a mandatory or compulsory payment, and playing the lottery is voluntary, so lottery revenue cannot be a tax. But they're confusing the purchase of a product with the payment of the tax on the product."

North Carolina's Republican Party Platform states the situation succinctly (Article V, 2008): "The state lottery monopoly turns government into a bookie, operates only by false advertising, capitalizes on broken dreams and personal irresponsibility, and places the burden of taxation most heavily on those who are least able to afford it."2008 NC Republican Platform.

Should state governments be exploiting their own citizens through promoting lottery gambling?