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Comment by squidfood | Hacker News Reader

Tell that to the state lotteries...

State lotteries are a scam and a tax on the poor. They should be made outright illegal by the federal government. The money collected by them is usually earmarked for one thing, used for that purpose for a while, and then raided for some other pet project.

Add to this the fact that lottery winners are usually no better off a few years after winning and I can't see any reason why the state should sponsor them.

It's more than that. I don't want to overstate it, but it's also a false hope that keeps people from addressing real systematic concerns.

I think the idea is that if you legalize games of chance and have them run by the state, the rules are at least fair and there is some level of oversight that prevents people from being completely taken advantage of. The games of chance are still fundamentally unfair, but it's a 60/40 kind of unfair instead of 80/20.

In the absence of state lotteries, people with gambling problems would just find another way to gamble that supports organized crime rather than the state.

> I think the idea is that if you legalize games of chance and have them run by the state, the rules are at least fair and there is some level of oversight that prevents people from being completely taken advantage of.

In NL we just had a huge scandal with the legal lottery being essentially a rigged game with far less chance of paying out than they would have you believe. (This does not affect me because I've never put a red cent towards a lottery but I can see how those that felt that the state could be trusted in this respect feel more than a little let down).

It's kind of the opposite actually, if you have a state lottery, there's not really any incentive to make the payout rates favorable. Whereas if you have multiple competing lottery companies then hopefully they would be forced to have reasonable payouts at the risk of having customers go to their competitors.

Of course they would have to be regulated, the mob will just do whatever they want.

>I think the idea is that if you legalize games of chance and have them run by the state, the rules are at least fair and there is some level of oversight that prevents people from being completely taken advantage of.

In California the mob "numbers racket" had a better payout (as a percentage of ticket sales) than the state lottery does.

Yeah, but the state also isn't going around breaking peoples' legs because they can't pay.

Even the mob takes lottery ticket money up front. That's not really an issue unless you're borrowing from them to play. But if you're borrowing to play you could just as easily be borrowing for the state lottery.

>The money collected by them is usually earmarked for one thing, used for that purpose for a while, and then raided for some other pet project.

I thought the common plan was to shift other sources of funding for what ever the lottery is meant for. Money is fungible so the end result is basically the same, but they technically are allowed to claim the lottery money is going to where it is supposed to. Lawmakers just never mention that for every dollar the lottery makes, they take a dollar out of the normal budget allocation and put it somewhere else.

Texas did both. They diverted the funds from lottery and cut funding for education.

[0]http://www.texaspolicy.com/blog/detail/tracking-the-distribu...

If I want to spend a few bucks on the lottery every now and then where do you or the state get off telling me I'm not allowed to do that? It's a private transaction that has nothing to do with you.

The lottery should be illegal, full stop. It's a tax trap that launders already-taxed money from the poor in to high-marginal-rate taxable income for the government, using a method of fraud (read: gambling) that's illegal for most individuals to engage in or set up on their own.

Or the profits of it should be legally required to be only spent on helping the poor.

It's not that simple though.

If e.g. the state spends $10 million on the poor with the lottery illegal, then the lottery is made legal and $5 million from it is earmarked for the poor, what's to stop the state from lowering the previous $10 million to $5 million, which would mean the poor are getting no more money than before the lottery was made legal?

This is exactly what has happened: https://www.washingtonpost.com/blogs/answer-sheet/post/mega-...

Gambling isn't inherently a method of fraud. By definition it can't be so long as you know going in that you are in fact gambling and there is no attempt at deception occurring.

I've personally never met someone that played the lottery that thought they had tremendous odds, or otherwise failed to understand the nature of the lottery.

Would you mind explaining the fraud that is occurring?

Many individuals can read the odds right back to you, but that doesn't imply they have a great grasp on what those odds actually mean. It may not be legally wrong under any current law, but give the commercials that make a very emotional appeal (you can never win if you don't play, he look at all the stuff someone one... except they choose not to play), it has the same stink as offering a child a trade that is not in the child's interest. The latter is illegal because we can draw an easy to draw line using age, but it is just as hard to say what is the... whatever... needed for a child to agree to a trade not in their favor that they don't have but that an adult has.

>I've personally never met someone that played the lottery that thought they had tremendous odds, or otherwise failed to understand the nature of the lottery.

This is besides the point. Even if you believe it's not the government's responsibility to improve the lives of the poor, I think we can all agree that the government has no business actively making the lives of the poor worse, which is what the lottery does. It uses the public's trust of the state to promote a get-rich-quick scheme that a.) people have almost zero chance of winning and b.) will most likely not even improve their lives past the first few years even if they do win.

The fraud being committed is the state using its advertising and trust to convince people that they could be a winner, when they basically can't. Whether people 'understand the odds' is irrelevant. The government is convincing people to divert what little money they have into a bottomless pit.

The state lotteries (at least most of them) directly collect more money from each lottery dollar than they charge in taxes.

This article shows the payouts for each state:

http://fivethirtyeight.com/datalab/what-percentage-of-state-...

(for my purpose here it unfortunately garbles that information behind the per capita revenue, but most are clearly above ~25%)

This article shows that state taxes aren't that high:

http://taxfoundation.org/article/state-individual-income-tax...

That doesn't account for federal taxes, but the less than $100 billion of lottery revenues mentioned in the FiveThirtyEight article aren't going to really swing that needle.

1) It's not a tax. The IRS does not start sending you nasty letters if you don't play the lottery.

2) It's not fraud. Gambling is not fraud.

3) Yes, it would be illegal for you to set up your own lottery. But the state does a lot of things you would be arrested for doing, so that's not a very compelling argument.

Furthermore, a lot of people get genuine enjoyment out of playing the lottery. Who are you to say that's not worth the cost to the people who play?

I think OP is saying the money used to buy the tickets is taxed, then the payout is taxed again (at a higher rate). Not that the lottery itself is a tax.

Not defending the double taxation, but I just wanted to point out that it's not limited to the lottery. We are taxed on what we earn (multiple times even: State taxes, Federal taxes, FICA, and municipal income tax in some places). Then we are taxed on what we spend (sales tax). Sometimes the state gets to tax the same transaction twice or more; if I sell a car to another person, I pay income tax on what I get, and she must also pay title tax, which here in Georgia is 6.5% of the value of the car. If I buy a car from a dealership, I pay sales tax as well as title tax.

Pretty much all tax systems are double-dipping, corrupt cesspools. But what's the alternative?

The fraud: the government is using its advantageous position to aggressively market a get-rich-quick scheme that has a virtually zero chance of ever getting you rich. You could play a million times and not win. It then benefits from direct profits and taxation of winnings. This all has demonstrably negative effects on public health in the form of addiction and exacerbation of poverty.

I'm skeptical this has any effect on poverty. Poor people who buy lottery tickets wouldn't spend the money on job training if they couldn't buy lottery tickets. They'd find a bookie and bet on sports, or they'd play the horses.

And I don't find your argument characterizing lotteries as fraud persuasive in the slightest. People who buy lottery tickets are well aware they're chances of winning are pretty close to zero. Yes, they have to pay taxes if the do win, but that's not exactly an overriding concern.

> already-taxed money

There's no such thing. Money isn't taxed by income tax, (some) events in which money changes hand are taxed.

The idea of "already-taxed money" is silly, and makes sense if your premise is that each dollar created should be taxed once and then never again, which would be a novel model, but its not something the existing model even pretends to be, and without an argument as to why such a system is obligatory, criticizing something on the basis of it creating a taxable event from "already-taxed money" is just stunningly bizarre.

Not worded well, admittedly, but IMO removing "already-taxed" from the parent doesn't change the original point.

The government has a conflict of interest here: it benefits tremendously from direct profits and the top-marginal-rate income tax assessed on winnings, but at the same time causes damage to public health via addiction, poverty, bankruptcy, and foreclosure. There is no useful real-world activity associated with the prize money itself: you're collecting peoples' money and giving it back to someone, then collecting income tax on that amount. Lottery profits beyond that are often promised to schools or public works projects (which would be economically useful), but that money is often redirected elsewhere [1].

Lotteries are marketed aggressively, often with depictions and/or anecdotes about what you'll get to do with the winnings. Some lotteries go as far as installing games in grocery stores. Odds of winning are almost always buried in fine print or glossed over. Lotteries are disproportionately played by the poor. In some lotteries, 80% of sales come from 10-15% of the players [2].

Why /should/ this exist?

[1] https://www.washingtonpost.com/blogs/answer-sheet/post/mega-...

[2] http://www.nytimes.com/2007/10/07/business/07lotto.html?page...

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