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1 Alicia Hansen, Lotteries and State Fiscal Policy 1 (2004)

handle is hein.taxfoundation/bpegxz0001 and id is 1 raw text is: October 2004, Number 46 By Alicia Hansen E 'cuIveS- mary not make sense to consider the lottery tax to A o .. . Ybe a user fee' since the revenue raised is not Forty states and the District of Columbia used simply to cover the costs of lottery provi- currently run lotteries and other states are sion. Operating costs (including vendor corn- considering them. State-run lotteries are the missions) in Fiscal Year 2003 accounted for most popular form of commercial gambling only 27 percent of the takeout from tradition- in the U.S., with half or more Americans al (not including video lottery terminals) lot- participating in any recent year. Compared to tery games; the rest was kept by state govern- other forms of legal gambling, they are sec- ments as profit-really tax revenue-and ond only to casinos in terms of the takeout used to fund projects that were, for the most (consumer spending minus prizes). In Fiscal part, entirely unrelated to lotteries. Year 2003, total consumer spending on lot- The fact that playing the lottery is volun- tries was nearly $45 billion and per capita tary does not make this Profit any less of a spending was $155.33. In FY 2002, the aver- tax, as some lottery proponents have argued. A age American spent more money on lotteries mandatory tax on a voluntary purchase is still than on reading materials or movies (theater a tax. In this respect, an analogy can be drawn admissions only). Approximately 31 percent between the sale of state lottery tickets and the of consumer spending on lotteries, or almost sale of alcohol in Alcoholic Beverage Control $14 billion, was transferred to state coffers in states, where the government, rather than pri- FY 2003, and in FY 2002 lottery funds vate vendors, sells alcohol and raises revenue accounted for 2.2 percent of own-source gen- from the operation of liquor stores as well as eral revenue in the average lottery state. from excise taxes on alcohol. With both prod- The popularity and revenue raising poten- ucts the government legalized a previously tial of state lotteries raise serious tax policy illegal product, granted itself a monopoly on concerns. First, we must ask whether the lot- the sale of that product and collects revenue tery is a tax. Although no government agency from the sale of the product. In both cases technically considers it a tax, it is nonetheless the revenue collected is above and beyond the an implicit tax. From a revenue standpoint, amount needed to cover the cost of selling the lottry ickts ae n diferet fom ther prouct good sujec to xcie txes;onc th funs Te scondtaxpolcy cncen d aetasrd t tt ofrte a e telc ftasaec.Sudtxplc

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