Massachusetts Town Considers Local Lottery

May 21, 2008

We have pointed out the flaws of state-run lotteries many, many times: they impose taxes paid disproportionately by the poor; they’re not transparent, or honestly labeled as taxes; the revenue is often not spent as promised; they impose an unfairly high implicit tax rate on one particular consumer good; and they unnecessarily increase the overall complexity of a state’s tax system. There’s also a question of whether running a gambling enterprise, as a monopoly business, is an appropriate activity for a state government.

We have repeated these arguments again and again in various forms: op-eds, studies, blog posts, commentaries, amicus briefs, and legislative testimony. But now, after all that work, it looks like we might have to start all over again and repeat these same arguments, but with the word “local” instead or “state”—at least if one Worcester, MA, city council member has his way.

From the Worcester Telegram & Gazette:

As municipal officials scratch their heads trying to figure out ways to come up with much-needed additional revenues for cash-strapped budgets, one city councilor believes a new lottery game could be just the ticket to raise additional funds for the city’s public schools.

District 1 Councilor Joffrey A. Smith has filed an order for Tuesday night’s City Council meeting requesting that City Manager Michael V. O’Brien seek special legislation authorizing the Massachusetts State Lottery Commission to create a new scratch ticket game to be sold only in Worcester.

Mr. Smith is proposing that proceeds from that game be directed to the city to provide additional funding for the public schools.

He said the money could be used to reduce the number of students in classrooms, purchase textbooks, equipment and supplies, as well as help fund athletic programs.

. . .

Mr. Smith said he discussed his idea with City Solicitor David M. Moore. He said he was advised that to get the process rolling, the city would first have to file special legislation that would authorize the Massachusetts State Lottery to create such a game.

Revenues from all state lottery games now go directly to the state. The state then divvies up that money to the state’s 351 cities and towns in the form of “Lottery Aid” each year.

Last year, the Massachusetts lottery distributed more than $935 million in direct local aid to cities and towns. Of that amount, Worcester received $39.9 million in fiscal 2008 [emphasis added]. Lottery funds are not earmarked for any specific purpose, allowing communities to decide how they would like to spend those monies.

The lottery does not offer any games in which revenues are dedicated to a specific municipality or program.

Lotteries are bad tax policy whether they are played at the state level, national level, international level, or local level. If the $39 million Worcester already received from the state-run lottery is not enough, perhaps the city council should examine its spending priorities and efficiency.

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