Walking through Portland airport recently, the Antiplanner noticed a sign from the Oregon Lottery claiming that 97 cents of every dollar paid for lottery tickets was “returned to Oregon.” As the Lottery’s web site says, “97 cents of every dollar played comes back to Oregon . . . money that goes to jobs, schools, parks and watersheds.”
That number sounded suspicious to me. If 97 cents is kept by the state, and no doubt some additional is used for administering the lotteries, where do they get the money to pay out lottery winners?
I didn’t have time to investigate, but the Oregonian did. It found that the lottery sold $9.8 billion worth of tickets in 2011. About 3 percent went for expenses, $550 million went to the state, and the rest went to prizes. So when the Lottery say 97 percent goes to the state, it includes the prize money, something not mentioned in the ad (and, as the Oregonian says, “winnings don’t necessarily stay here”). In fact, only about 5.5 percent goes for “jobs, schools, parks and watersheds.”
The Oregonian says this is “disingenuous.” The Antiplanner calls it lying, also known as government on an ordinary day.
In terms of public policy, lottos are nothing more than a voluntary taxation scheme.
If you are a Keynesian, they are beneficial economically, probably more beneficial than any public works or stimulus scheme. Lottos take various small amounts of money that otherwise would be blown on beer, soda, cigs and junkfood. Then lump it together and dump it into the hands of some twit who will immediately blow it on big ticket items like cars, boats, houses, furniture and electronics. The multiplier effects of spending on these items is vastly greater than the multiplier effect on items like beer, soda, cigs and junk food.
The Antiplanner Reply:
June 21st, 2012 at 7:20 am
Those are good points. On the other hand, lotteries are regressive, and they create giant slush funds that government agencies can spend with little oversight. Most of the things funded by the Oregon Lottery, including economic development, parks, and wildlife, either shouldn’t be done by government at all or should be funded out of user fees.
But my main point is that this is just one more example of the fact that government agencies routinely lie to the public.
Jardinero1 Reply:
June 21st, 2012 at 8:39 am
Regressive but not coercive. Sales tax is regressive and coercive. Sales taxes disappear into an enormous black hole of discretionary spending. At least the “lotto tax” is dedicated. In Texas, where I live, it is dedicated to the state education budget.
PlanesnotTrains Reply:
June 22nd, 2012 at 9:31 am
In California, they sold the lottery on funding education. If I recall correctly it was to provide money for arts, sports etc over and above academics. It had much higher receipts then expected, so it was then expanded to pay for books and matierls in the late 1980′s. By the late 1990′s they realized it was making a ton of money and promptly removed an equivalent amount of money from the education budget. Now nobody knows where the money goes and the public schools in California are a laughing stock.
Prizes only account for 20% of the Oregon Lottery funds (what a terrible bet!). Retailer commissions are another 20%. About 55% is given to the state economic development fund.
The revenues are about $1 billion per year. The $9 billion number is totally bogus.
See the Lottery audited financial report at http://oregonlottery.org/About/docs/2011cafr.pdf
Good point Jardinero1, the tax on stupid people argument. Some economists theorize lotteries facilitate a higher degree of inequality than a society should have to maximize its progress, by giving the masses false hope, of course millions of people loosing every week is enough to shred anyone’s optimism. Others argue that any social system that allocates resources based on chance is one that is corrupt as opposed to rewarding merit, achievement or intelligence. I don’t wanna sound insensitive but it is a game whose purchased tickets that statistically are mostly bought by blacks, hispanics and lower income people. I ought to know. I pick up litter on the side of my house near the public sidewalk where migrant workers and people in Section 8 housing dump their litter. Normally I pick up cans and foam coffee cups. When lottery fever hits Maryland, I pick up about 20-50 shredded tickets.
Maybe the Antiplanner knows because I sure don’t even know what happens to the money gathered by the Maryland Lottery.
Jardinero1 Reply:
June 21st, 2012 at 1:24 pm
I do agree that the poor buy a disproportionate share of lotto tickets. From that, one could infer that it is a tax on poor people. I don’t agree that the lotto is a tax on stupid people unless one believes that poor people are also stupid people. I don’t think they are.
I don’t see the difference in whether poor people buy lotto tickets or energy drinks, or a bag of chips or rent a DVD or a million other sundry items priced for around a dollar.
Why do mostly middle class, mostly white people, get shrill and self righteous when mostly lower income and mostly brown people entertain themselves with lotto. I play lotto twice a week. I drop a whole eight bucks a months on it. I never win, never will, but I have a great rapport with the cashier when I buy my ticket and I really enjoy the anticipation that comes with waiting to see if my numbers come up. What’s the difference between that and drinking a beer with friends? Drinking a beer is more expensive and potentially more dangerous.
LazyReader Reply:
June 21st, 2012 at 4:37 pm
I buy a scratchoff every now and then. I did win a hundred dollars once. I’ve never bought a powerball or 6 digit number ticket.
Sandy Teal Reply:
June 21st, 2012 at 7:53 pm
Actually a number of economists say the purchase of one lottery ticket at a time is a real bargain, not because of expected financial gain, but that it provides a rather inexpensive recreation and essentially a chance to dream about winning.
I almost never buy lottery tickets, but a friend in another state recently bought one in the $100 + million Mega whatever lotto, and I found myself daydreaming about it. Not bad for $1. Much better than a movie.
PlanesnotTrains Reply:
June 22nd, 2012 at 9:34 am
I play on the rare occasion. One would be an idiot not to drop down a buck to try and win $100 million or higher jackpot, regardles your income level.
Maybe the 97% figure represents how much of the money gets spent again within Oregon — meaning it’s the same type of silly accounting so often used to justify expensive sports stadiums, bids to hold the Olympics, and the like.
“The Oregonian says this is ‘disingenuous.’ The Antiplanner calls it lying, also known as government on an ordinary day.”
Bazinga!