Article Oct 31, 2017

State lotteries are an exploitative tax on the poor

From the 1800s to the mid 20th century, government-run lotteries in America were not only recognized as immoral but were banned in every state. That changed in 1964 when New Hampshire—a state without an income tax—reinstituted a state lottery. Over the next 50 years, 43 more U.S. states and three territories (the District of Columbia, Puerto Rico, and the U.S. Virgin Islands) would legalize state-run gambling operations to pay for government programs.

Mississippi is one of only six states that do not have lotteries—but that may soon change. In 1992 Mississippi voters removed the prohibition on lotteries from the state’s constitution, and earlier this year the state legislature appointed a study committee to examine the issue. A bill proposing to implement a state lottery is expected in the 2018 session.

In the 1830s, evangelicals lead the way in opposing state lotteries. From 1844 to 1859, 10 new state constitutions contained lottery bans, and by 1890, lotteries were prohibited in every state except Delaware and Louisiana. Today, though, evangelicals—including Southern Baptists—are often leading the way in reinstituting state-run lotteries.

“I’m a Baptist. You know us Baptists don’t believe in gambling . . . ” said Mississippi Attorney General Jim Hood this summer. “But I have to be a realist. The Legislature is not passing any revenue [tax increase]. That [lottery revenue] is money available for education—should be spent on education.”

Lotteries are predatory gambling that exploit our poorest citizens.

When it comes to economic and political issues, there are many areas on which Christians can legitimately disagree. But one area where the Bible is clear is that we must oppose the exploitation of the poor and vulnerable by the powerful. That is exactly why we must reject rationalizations about lottery financing: State-sponsored lotteries use government power to support a type of predatory gambling that exploits our poorest citizens.

Taking from the poor to give to the middle class

In 2013 lawmakers in North Carolina proposed making it illegal for lottery ticket merchants to knowingly sell a lottery ticket to a person on government welfare. At the time, Rep. Paul Stam said, “We’re giving them welfare to help them live, and yet by selling them a ticket, we’re taking away their money that is there to provide them the barest of necessities.”

The irony is that taking money from those who need government assistance to pay for government programs like education is a not a glitch in the system but a primary function of state lotteries. The middle class and the wealthy may occasionally buy lottery tickets, but the revenue they bring in is not enough to make state lotteries economically viable. To make enough money to pay for the lottery and to bring in additional revenue the state needs to rely on poor people to spend a disproportionate share of their income on lottery tickets.

“The state lottery is a tax, which is to say it is forced wealth redistribution,” says economist Mark Thornton. “The lottery tax is regressive. It takes a higher percentage of a poor man’s wages than a rich man's. Every study has shown this to be the case and there has not been one published study that contradicts this finding.”

An example of what Thornton is referring to is a 2008 report from the Federal Reserve Bank of St. Louis on the relationship between income and lottery revenue. That study found that a large portion of lottery profits come from people who receive some financial subsidy from the government. Other studies have found that people who played the lottery with an income of less than $20,000 annually spent an average of $46 per month on lottery tickets. That comes out to more than $550 per year, and it is nearly double the amount spent in any other income bracket.

“A person making $20,000 spends three times as much on lottery tickets on average than does someone making $30,000,” says Jordan Ballor. “And keep in mind that these numbers represent average spending. For every one or two people who spend just a few bucks a year on lotteries, others spend thousands,” Ballor adds.

All of this is taking place in a system of legalized gambling that is monopolized and promoted by those in political power. Where state governments are supposed to be looking after the welfare of their citizenry, the commonwealth of all the people, the establishment of a lottery has in fact betrayed the citizenry.

What begins as a well-intentioned plan to provide for the needs of the people—education funding, for example—very often becomes just another source of revenue for a voracious state treasury. Lotto revenue is often diverted for new purposes through legislative and bureaucratic chicanery.

State-sponsored plundering of the poor

That the individual states establish predatory gambling is disturbing. Yet they compound the evil by promoting the lottery as a way for those with limited resources to secure their financial future. Unfortunately, many of our poorest citizens believe this exploitative advertising. A study by the Opinion Research Corporation for the Consumer Federation of America and the Financial Planning Association found that 38 percent of those earning less than $25,000 annually believed the lottery is the solution to accumulating wealth.

“Normally government would outlaw a business that offered such outrageously bad odds to its customers and it would tax away such ‘obscene profits’ but in this case it advertises the lottery as a way that everyone can get rich,” says Thornton. “This is a good lesson about government for the many among us who feel that the government is suppose to protect us from such deceit and plundering.”

I agree with Attorney General Hood and other Christian politicians who claim we must be “realists.” But the reality is state lotteries are a form of predatory gambling. Governments should be protecting the poor rather than exploiting them to fill the tax coffers. As Bob Terry has observed, a state-sponsored lottery is one of the cruelest and most callous proposals a state legislature can make.

Any politician who isn’t aware that state lotteries are a progressive tax on the poor simply hasn’t done their homework. And any politician who supports them knowing how they oppress the poor should remember they are showing contempt for our Maker (Prov. 17:5a).