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1 Alicia Hansen, Testimony to Vermont Blue Ribbon Tax Structure Commission: The Role of the Lottery in Vermont's Tax Policy [i] (2009)

handle is hein.taxfoundation/taxfaafd0001 and id is 1 raw text is: FOUNDATION Testimony to Vermont Blue Ribbon Tax Structure Commission: The Role of the Lottery in Vermont's Tax Policy November 17, 2009 by Alicia Hansen Thank you for inviting me to testify today. First I'd like to explain why any discussion of tax reform merits an examination of the state lottery. The lottery is an implicit tax, No state government labels lottery profits tax revenue, but they should. The lottery must be evaluated as a tax, and when we subject it to the tests of sound tax policy, it fails. In 2008 lotteries generated over $60 billion in consumer spending. This translated to a profit for state coffers of over $17 billion. Slightly over half the money spent is returned to players as prizes. Part of the remainder covers operating costs-including vendor commissions, equipment, administration and advertising-and the rest is transferred to state coffers. States call their portion profit but it is actually implicit tax revenue. Lottery proponents argue that a tax is a mandatory payment, and playing the lottery is voluntary, so lottery revenue cannot be tax revenue. But they're confusing the purchase of a product with the payment of the tax on the product. Purchasing a lottery ticket is voluntary, but the tax portion of the ticket price is not, just as a sales or excise tax is compulsory on a voluntary purchase of alcohol, clothing or books. State-run lotteries fail the tests of sound tax policy in multiple ways: They are not economically neutral, they are not simple to administer, and they are not transparent. The tax system should be as clear and simple as possible; taxpayers should understand what is being taxed and what the rates are. The lottery tax, however, is hidden. The state creates a monopoly for itself and builds the tax into the price of the tickets, then advertises the lottery as a recreational activity rather than a revenue-raising activity.

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