State Lotteries and Regressive Taxation

According to Investopedia, the definition of a regressive tax is “a tax that takes a larger percentage from low-income people than from high-income people.” Unfortunately when it comes to the lottery, that is the case in the U.S. State lotteries cause disproportionately high spending among low-income citizens, and are therefore a regressive tax.

State lotteries operate by printing large quantities of lottery tickets. Each ticket has an extremely small chance to reward their owner with a huge monetary prize. However, the insensible dreams of wild riches are mostly those of the impoverished. So, in an effort to escape their situation, they buy lottery tickets - but this only serves to send them further into poverty. Though the state is not deliberately asking for money from the low-income citizens, their lotteries have the same effect.

The Fiscal Policy Institute shows that lottery purchases are 4.0% of citizens with a median household income of $20,000, whereas they make up 0.25% of citizens with a median household income of $85,000. If it's the poor who are purchasing the majority of lottery tickets (money which goes to the government), then that meets the definition of a regressive tax.

The NCPA offers more evidence on the disparity between low- and high-income citizens’ expense on lottery tickets: “the dollar amount spent on the lottery by the lowest-income individuals (earning less than $10,000) is twice as much as the highest earners (earning more than $100,000 annually).” The impoverished buying twice as many lottery tickets than the wealthy, thus giving more money to the state government, is more proof that lotteries are a regressive tax.

In a memorandum to the governor of Massachusetts, Dong Kwang Ahn and Elizabeth Caldona did a study of 27 Massachusetts cities and found that “in 2009 the people living in Newton, one of the wealthiest cities in the Commonwealth with a $56,285 per capita income spent 0.4 % of their income on lotteries, while Springfield, one of the poorest cities in Massachusetts, with an $18,187 per capita income spent 3.6 % of its income on lotteries.” Here is yet more evidence that the poor are spending disproportionately high amounts on the lottery.

As the studies, research and statistics have shown, state lotteries in the U.S. have unintended consequences. Impoverished citizens feel that the only way out of their situation is to keep spending money on the one-in-a-billion chance of wild riches - but in doing so plunge further into poverty. By making the lottery available to everyone, the government is indirectly taking advantage of the poor.

Works Cited:

• "Regressive Tax Definition." Investopedia. N.p., n.d. Web. <http://www.investopedia.com/terms/r/regressivetax.asp>.

• Kramer, Brent. "The New York State Lottery: A Regressive Tax." Fiscal Policy Institute (special report) (2010): 961-66. www.fiscalpolicy.org. Fiscal Policy Institute, 29 Mar. 2010. Web. <http://www.fiscalpolicy.org/StateTaxNotes_LotteryRegressive.pdf>.

• Davis, Michael L., Ph.D., and Edwin L. Cox. "Taxing the Poor: A Report on Tobacco, Alcohol, Gambling, and Other Taxes and Fees That Disproportionately Burden Lower-Income Families." Ed. Matthew P. Moore. National Center for Policy Analysis 300 (2007): n. pag. www.ncpa.org. June 2007. Web. <http://www.ncpa.org/pdfs/st300.pdf>.

• Ahn, Dong K., and Elizabeth Cardona. "Interoffice Memorandum." Maxwell School (2010): n. pag. www.maxwell.syr.edu/Faculty/. 10 May 2010. Web. <http://faculty.maxwell.syr.edu/jyinger/classes/PAI735/studentpapers/2010/ahn_cardona.pdf>.