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Mitchell: Lottery is the Holy Grail in the Art of Taxation

Jean-Baptiste Colbert was finance minister for French monarch Louis XIV. His best quote: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

Inasmuch as it provides dollars for the public treasury, a lottery is a tax. Payment is optional — no one has to buy a lottery ticket — but it’s government preying on our hopes and aspirations. Scratching a ticket is a heck of a lot more fun than looking at a paycheck stub showing wages earned, but forfeited to “withholding.”

Back in 1990 Louisiana created a lottery, but Mississippi lawmakers resisted. After all, there was a section of the state Constitution that specifically banned lotteries. Too, prosecutions were actually under way against charitable bingo parlors for not being charitable enough.

Casino authorization came next in Louisiana and was too much for the Legislature. Miffed because so many dollars were making their way from the pockets of Mississippians into the public treasury of Louisiana, Mississippi, with no debate or discussion, followed Louisiana into the casino marketplace — and has done quite well as a result.

A lot of water has flowed down the river in the nearly 30 years since. Nothing has changed about the morality of state-sponsored gambling. Just about every year a lottery bill has died an ignominious death in Mississippi, but (1) videos have been incessant showing hundreds of Mississippians lining up at neighbor-state outlets during Powerball surges and (2) Mississippi is broke. The state leadership, stuck between a fervent pledge to cut government and hundreds of condemned bridges, has had a change of heart.

The issue is whether Mississippi joining the parade of 46 other states with lotteries will come too late and generate too little.

The first state lotteries of the modern era date back 50 years or more, so there is a lot of data.

Much of this was mined by a team at the University Research Center last year at the behest of House Speaker Philip Gunn, R-Clinton. Gunn had opposed a lottery but in recent days said he had become neutral.

There was suspicion that the URC analysis (which is available in full on the internet) would be skewed given Gunn’s previous position, but the numbers are from verifiable sources. In sum, the best guess was that a Mississippi lottery would generate at net tax gain of $83 to $94 million per year. For context, this year’s recommended state spending on prisons is $335 million. So, lottery revenue would be significant, but it’s not game-changing.

The figure is “net” because state gains from lottery tickets would be offset by a loss in at least one other area: sales tax. A person can only spend a dollar once, so it follows that dollars spent on lottery tickets are dollars NOT spent on food, clothes or other items on which sales tax is collected. Too, jobs might be gained by demand for more convenience store clerks, but jobs would be lost in retail. The estimate, based on a $93.5 million reduction in the state’s Gross Domestic Product, is 1,561 people losing jobs.

The bigger questions are (1) who will buy tickets and (2) how many.

For 2015, the North American Association of State and Provincial Lotteries reported lottery “investment” as $325 per year per adult in America. It is also well-established that the lower a person’s personal income, the more likely it is that person will be a player. (Rich people are already rich.) A cynical statement is that a lottery is fully in line with the penchant of Mississippi’s leadership to punish people for being poor, but facts are facts.

A deeper dive, reported by Gallup, reveals a factor that may prove significant. It is this: The proportion of people18 to 29 buying lottery chances is declining. Millenials, it seems, increasingly have other diversions and other purposes for their discretionary income. Fewer are pinning their dreams on lottery winnings.

Everything, it seems, is cyclical. Witness money from casino taxes. Mississippi gross gaming revenue bumped up from 1994 (the first full year of casinos) until 2007 when it started sliding down to a point today about $800 million annually less than the peak. Casinos face more competition, but the bloom is clearly off the slot machine rose, too.

People want and need government services, but lawmakers are hesitant to hear the hissing. It’s disingenuous to fund public expenses by stealth, but, as Colbert knew, it works.

Charlie Mitchell mugshot 2014Charlie Mitchell is a Mississippi journalist. Write to him at cmitchell43@yahoo.com.*Editor’s Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect those of other staff and/or contributors of HottyToddy.com. For questions, comments or to submit your own guest column, email hottytoddynews@gmail.com.

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