State-Run Lotteries: Part of the American Dream or Just Poor Tax Policy?

July 03, 2007

Tomorrow, on Independence Day, many people will reflect on the American Dream, which includes the opportunity to become successful and wealthy through hard work—or pure luck.  While embracing the idea of a strong work ethic, Americans simultaneously love a get-rich-quick-scheme, from the Gold Rush to TV game shows to state-run lotteries.

The Massachusetts Lottery has created  a special lottery game to help Americans indulge their get-rich-quick dreams, although sales have been disappointing.  From Lottery Post:

The Massachusetts Lottery's Star Spangled Sweepstakes is shaping up to be a Yankee Doodle disappointment.

With just four days remaining until the game ends on Saturday, prior to the July 4 drawing, sales of the $20 ticket have been significantly below expectations, said lottery spokeswoman Beth Bresnahan.

Through Monday sales hovered at about 30 percent of the game's 4 million tickets, or about 1.2 million tickets, have been sold.

Bresnahan said lottery officials are attributing the sluggish sales to the game's "newness."

Perhaps the regular Massachusetts lottery players who chose not to purchase the Star Spangled tickets were anticipating the new Tax Foundation Background Paper on the topic of state-run lotteries. The paper, released today, explains that lotteries are a source of implicit tax revenue and exemplify poor tax policy for a number of reasons. They are not economically neutral; they are regressive; they lack transparency; they unnecessarily complicate the tax system; earmarked. funds are often not used as promised; and lotteries are a business for the private market, not a state government.

Independence Day would be a good time to reflect on sound tax policy—necessary for any democracy to flourish—and to resist the temptation to buy a lottery ticket.

Click here to read the new study. Click here for more on state-run lotteries.

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