Is Maryland Gambling on Gambling to Balance the Budget?

December 29, 2006

Like many other states, Maryland has been relying heavily on its lottery as a revenue source. But legislators are discovering that their bet has not paid off the way they hoped. From Lottery Post:

Maryland’s lottery has been slowing down as a revenue source for years and will continue to underperform as residents seek other gambling ventures, including betting on slot machines in neighboring states, budget analysts and state officials say.

“They may have seen some growth in the lottery [sales], but relative to growth in the economy, it’s not keeping track,” said Tori Gorman, a former economist for the state legislature.

The lottery’s diminishing contribution to the state budget is one of many reasons why Maryland is facing nearly $8 billion in deficits over the next five years, analysts say.

Most of the state’s economic growth has occurred among high-income earners, who do not regularly play the lottery, said Mrs. Gorman, who co-wrote a recent budget study for the Maryland Public Policy Institute, a nonpartisan, nonprofit research group.

That is one reason the lottery, despite its growing ticket sales, does not add as much to the budget, she said, adding that lottery players tend to be lower-income workers.

Gov. Robert Ehrlich has attempted unsuccessfully to legalize slot machines to offset the money spent on out-of-state gambling. However, state-run slot machines, whether overseen by the lottery agency or another agency, would present all the problems of state-run lotteries, including volatility as a revenue source. The state lottery is a poorly designed implicit tax, paid disproportionately by the poor, and slot machines would simply exacerbate the tax policy problems created by the lottery.

Should Maryland really be relying on the lottery to balance the budget? Gambling on gambling is never good tax policy.

For more on state-run lotteries click here.


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