State-Run Lotteries Giving away Free Gas in Lieu of Cash

July 9, 2008

Despite all the tax policy problems inherent in state-run lotteries, lottery agencies are nothing if not creative in their marketing.

From the New York Times:

Rising gasoline prices have brought a new twist on the state lottery in Florida.

Once a week for the next two months, the second-prize winner in the latest lottery promotion, Summer Cash, will win free gasoline for life. And some people think that is a better deal than the game’s first prize, a quarter of a million dollars.

. . .

Not that a winner’s right to free gasoline is unlimited. Rather, each winner will be awarded 26 prepaid gas cards, each worth $100, every year until death. Were the 44-year-old Mr. Acosta to win, and live to be twice his current age, the total payout to him in free gasoline would be $114,400. That is far short of the first prize, particularly since virtually all the gas prize would be paid in future dollars.

But with a gallon of unleaded regular in South Florida costing an average of about $4.30, some players are ready to forgo the math.

“Gas has become more precious than cash now,” Bernard Feldman said.

. . .

Florida joins states including Georgia, New Mexico, Oklahoma and Washington that have started giving away gasoline as a lottery prize. Florida decided to do so after 90 percent of regular lottery players, responding to a poll in which a year’s home mortgage payments were among the other choices, said the prize they would most prefer was free fill-ups.

State-run lotteries are a bad idea regardless of the prize: they impose a disproportionately heavy tax burden on the poor; they unfairly levy a higher tax on some goods than on others; and they constitute a dishonest, hidden tax.

The popularity of free gas as a lottery prize certainly emphasizes the obvious: people are upset about high gas prices. A handful of very lucky individuals may find their gas-price problems solved if they win this lottery, although they’d have to ask themselves how much they had spent on the lottery over the years and whether they’d come out ahead in the end; most lottery players end up losing far more money than they win. And if gas prices decrease considerably in the near future, the winners of this lottery might find themselves wishing they’d played a cash-prize lottery instead. However, for the rest of the nation, the free-gas lottery only combines two problems into one very bad idea.

Click here for more on gas taxes. Click here for more on state-run lotteries.


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