Is Obama Supporting a Tax on the Poor?

Just before a long Christmas weekend the “Obama Justice Department issued a legal opinion that permits states to set up nonsports Internet gambling.” The opinion upends decades of opposition and “contrary decisions, but its real effect will be on the poor (and young) who suffer the most from gambling.”

People only suffer the ill effects of gambling if they gamble. If you don’t gamble, you won’t lose any money gambling. If you don’t eat more calories than you burn, you won’t get fat. Like almost all social conditions, personal responsibility is the key. The Christian Science Monitor gets it right:

[B]ringing Internet gambling to America would hurt the poor, who are most affected when people lose money in government-approved games of chance such as state lotteries or casinos – not to mention the way it would reinforce a belief that one’s future depends on “luck” instead of individual merit.

But Obama is a Democrat. He knows that gambling adversely affects the poor more than any other group. In effect, he is supporting a self-tax on the poor.

Gambling is for fools. More people lose than win. If it were any different, it wouldn’t be gambling. The people who make the money are the people who build the gambling establishments and the states that reap the tax revenues.

There are some drawbacks. When there is an economic downturn, economies built on gambling and the entertainment that goes with it suffer. Nevada is a case in point. It has one of the highest unemployment rates in the country. Unemployment is near 13.5 percent.

The high school graduation rate in Nevada is 58 percent, the lowest in the nation. In 2009, the college graduation rate in Nevada was 35.8 percent, just above the last-place state Alaska. Why? Young people can make more money working in Vegas.

Consider lotteries. Most people are net losers. If they weren’t, the states that set up lotteries wouldn’t be making billions of dollars a year in after-tax money from people who play the lottery. And who are the people who play the lottery? Mostly it’s people who can’t afford to play.

Consider the following results from a South Carolina study:

  • Blacks made up 19.7 percent of the state’s adult population but accounted for 23.2 percent of lottery players and 38.4 percent of frequent players.
  • People in households earning under $40,000 accounted for 28 percent of the state’s population, 31.3 percent of lottery players and 53.4 percent of frequent players.
  • People with no high school diploma accounted for 8.9 percent of the state’s population, 10.5 percent of lottery players and 20.8 percent of frequent players.
  • People whose highest educational achievement is a high school diploma or GED made up 25.1 percent of the total population, 24.3 percent of lottery players and 33.3 percent of frequent players.

South Carolina’s 2008 lottery study showed that more than 50 percent of Pick 3 and Pick 4 players were black.

Similar statistics were found for Texas.

“Players making under $12,000 a year spent three times as much as those pulling in over $100,000 and nearly double those making between $75,000 and $100,000. ($19 a month for the under $12,000 respondents, vs. $6 a month for those over $100,000; and $10 for those earning between $75,000 and $100,000.)

High school dropouts who reported playing at least one game within the past year spent nearly three times as much as those with graduate degrees and almost as much as those with some college.

Everybody knows that lower income people use a higher percentage of their discretionary income to play the lottery.

Don’t get me wrong. I’m all for lotteries. I would like to see the replacement of the income tax with a national lottery. Given the statistics on who pays taxes and who plays the lottery, taxation would be more equally distributed. And because I’ve never played the lottery, I wouldn’t be paying any income tax.