A Lottery Payroll Deduction; Speed Dialing Tax

December 13, 2018 10:01 PM
  • Ken Adams, CDC Gaming Reports
December 13, 2018 10:01 PM
  • Ken Adams, CDC Gaming Reports

According to Wikipedia, speed dial is a function available on many telephone systems; it allows a person to place a call more quickly and with much less effort.  It is a great idea, a person no longer has to laboriously push all those buttons or touch numbers on a screen.  In an act of absolute genius a lawmaker in Michigan has found a way to put paying taxes on speed dial.

Story continues below

The tax is not an obvious or direct tax, but a tax nevertheless.  Representative Beau LaFave, a Republican from Iron Mountain, Michigan thinks the ideal way to put $100 million into the State School Aid Fund is for every worker in the state to play the lottery, using a payroll deduction system. LaFave thinks going out to buy a lottery ticket is just too much work; but buying a lottery ticket is good for the state and good for education.  So why not put the special lottery on speed dial?  In fact, if just half of the 4,700,296 people employed in Michigan opted to play 50 cents a week on the lottery, the state would get a hundred million dollars; and if more played, wow, just think of the possibilities.  The lottery game has not been created yet, but LaFave suggests the top jackpots would be $10,000; that would assure employers no one would quit their jobs if they won.  As good as the idea is, the bill probably is not going to get a proper hearing in Michigan’s legislature – yet.  An article in the Lottery Post, made light of the idea, but the Post did feel the need to remind the Michigan legislature and everyone else that playing the lottery is not an investment strategy and lottery tickets should be purchased for entertainment purposes only.

At first blush the story looks like something from The Onion, heavy in irony and humor.  But actually the lawmaker’s idea is a more transparent way to look at state lotteries.  Anti-gambling advocates have been calling lotteries a regressive tax for a long time; claiming it is a tax paid by the people who can least afford it.  Other taxes, including gaming taxes are assessed as a percentage of sales or value real estate.  Lotteries do not pay or charge a tax as such.  Instead, a lottery is a fixed percentage of all wagers, rather like a pari-mutuel bet at a racetrack.  That money, minus the operating expenses of the lottery, goes into state funds as directed by the enabling legislation. Lotteries have been used by governments to raise money in this country since revolutionary times.  It has been effective, but as opponents point out, lotteries appeal to a very small percentage of the population, or did until recently.  The advent of the multi-state, mega-jackpots has changed that.  When one of those jackpots gets over $400 million the number of players goes up dramatically; it may never reach 100 percent of the population, but it certainly exceeds 50 percent in some states.  The trigger point is an evolving process. At first a jackpot of $200 million created a purchasing frenzy, but that magic number keeps creeping up; now it is actually getting close to $500 million.

Regardless of the size of the jackpot that creates the lottery ticket buying craze, the mega-jackpots have changed the way lottery officials and lawmakers think about lotteries.  Those big jackpots put lots and lots of money into state coffers.  It makes officials hungry for more ways to drive sales.  And that brings me back to Beau LaFave.  His idea is perfectly logical; it not only eliminates the need for the worker to leave his/her house to buy a ticket, it eliminates the need to make a decision to buy a ticket.  Once a year the worker just checks the box and bang, he/she is in action the whole year. When workers are in action, they will want to watch the weekly (or monthly) drawings.  They are going to want to tune in to see if they are getting a bonus this week or month.  And of course, when more people watch, more people will sign up; and probably workers will want to have more taken out of their paycheck; why just .50 cents a week and not a dollar, or two or five?  If Michigan were successful, other states would follow suit.  And as with all other things economic in this country, the states that would really make money from such a scheme are California, Texas, Florida and New York. California has 18.6 million people employed; if each had a dollar a week deducted from their paycheck the gross would be $969,108, 400.  If the state gave back 80 percent in prizes, $193,821,680 would be leftover for schools or whatever. That is just a dollar a week, if workers got excited enough with the prizes and the drawings and started to raise their deduction the numbers could get really big.

Okay, I have taken this thing too far and made it ridiculous.  That may be true, but once an idea like this is on the table, some lawmaker will begin to make calculations based on the particulars of his/her state.  After all, the payroll lottery would not hurt anyone, it would help the state and provide instant bonus to some workers.  I mean a dollar or two a week, who would miss that? And it would be so quick, so effortless with speed dialing.