Opinion: The Desperation Tax

John Hess is a senior political science major. Contact him at jhess14@kent.edu. 

John Hess is a senior political science major. Contact him at [email protected] 

John Hess

Imagine you’re a state representative. To be re-elected you must give your constituents as much as you can while taking as little as possible from them in taxes. How do you bring that proverbial bacon back to your district? With money. And how do you get money? Through taxes. But your constituents hate taxes! You could level an income tax, but wealthy donors would disapprove. What about a sin tax on liquor or tobacco? These industries are too well-financed. Either way, they’ll back your competitor in the next election and make you and your plans history.

What if there were people who would volunteer for taxation? What if millions of Americans would discard considerable portions of their income just for the tiniest chance at a better life? They wouldn’t resist their taxation. They’d demand it. A desperation tax. Wouldn’t that be something?

And so the state lottery was born.

Lotteries are supposed to provide benefits beyond the chance to strike it rich. In Ohio’s case, all lottery revenue left after payout and administrative costs goes to public education. But things aren’t so simple. Whether our hypothetical politician won or lost the election, the same rules apply: maximize utility, minimize cost. Resources that were once a helpful supplement to traditional tax-based school funding are eventually taken for granted, leading state officials to designate proportionally less money to education because the lottery would make up for it. This means that the long-run contributions of the Ohio Lottery to education are practically negligible, succeeding only in making room elsewhere in the state budget.

A Duke University study has shown that individuals with incomes below $25,000 spend almost twice as much on lottery tickets as those with incomes above $100,000. High school dropouts pay $500 more than college graduates annually. Blacks pay almost five times what whites do, on average. The sheer mass of wealth being transferred from working class people to state coffers is sobering. Altogether, Americans spent roughly $70 billion on the lottery in 2014; that’s more than they did on sports tickets, books, video games, movie tickets, and recorded music sales combined.

State lotteries are regressive, backdoor taxes that can be levied by anti-tax politicians on a desperate, largely anti-tax populace. They’re cynical policy tools used to extract wealth from working people by offering them the opportunity to escape their hardships—but only one or two at a time. This isn’t an unfortunate budgetary necessity, either. Corporate income tax rates are actually exceeded by lottery revenue in 11 out of 43 states where they were legal. Taking from the working class and letting corporations and CEOs take a pass is an ideological decision, not a fiscal one. This is the societal equivalent of checking under couch cushions for loose change instead of going to the ATM. We all know where the real money is.

The cost of the desperation tax is greater than the money lost by individual players. It costs us the ability to imagine escaping from poverty structurally, as a people, rather than individually, as players. We should abolish state lotteries—replacing them with progressive taxes—to stop the hemorrhaging of wealth from our working class communities. We must advance alternatives to an economic system that subsists parasitically on the health and wealth of the working poor. 

John Hess is a columnist for the Kent Stater. Contact him at [email protected]