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I'm glad the article makes the very important distinction that: "The lottery is not a tax. The inflated price of lottery tickets is." I thought the article was

I'm glad the article makes the very important distinction that: "The lottery is not a tax. The inflated price of lottery tickets is." I thought the article was going to be yet another claim that "a tax on people who are bad a math", I was pleasingly surprised that it focused on the tax created by the state monopoly, not on the fact that lotteries have negative EV. The main counter I would offer to the article is that it isn't clear that there would be much of a "social" benefit in opening the lottery to competition. With the variance so high, and the players paying little attention to the odds, it's likely that the result would simply be a tiny amount of people earning about 35% more when they hit large prizes, and the rest spending the same amount of money on lottery.

fredkbloggs 11y ago
Yes, but still. The essence of a tax is its involuntary nature. The mafia's numbers racket was a tax, or would be but for the mafia's lack of legitimacy (if you consider being a legitimate government a precondition for levying a tax). You played or someone broke your legs or burned down your house. Last time I checked, no state is doing anything like that. There are many things wrong with state-run lotteries, but they're not a tax. If you don't like the way the lottery is priced, don't play. Your kneecaps won't know the difference.
- murbard2 11y ago
  If tomorrow the government decides only it can sell gasoline, and it does so with a 35% margin, that's strictly more restrictive than an excise tax.
  - fredkbloggs 11y ago
    I'm not saying that state monopolies are good. I'm saying that people need to get over the idea that everything they dislike or disagree with is "a tax". It isn't. A state monopoly on fuel would be almost impossible to avoid, and you could reasonably assert that it's a tax (there would be debate, but your position would be reasonable). After all, even if you don't yourself consume fuel, almost every product you could possibly buy has to be transported from somewhere, and most transportation services available today use fuel. A lottery is nothing like that. The product, such as it is, does not form a component of the cost of any other product. All you have to do to avoid giving the state money is not play the lottery, which should be very easy since they are very up front about the fact that a ticket is not only -ev but much more -ev than any casino or cardroom game you could possibly play. If people stopped playing, the state would either give up its monopoly or (in a classic monopoly-monopsony dynamic) cut its prices. And in the meantime, ex-players would be better off as well.
    - mgalka 11y ago
      Sounds like we are just talking semantics. When you buy liquor, you pay the market price (call it $10) plus an excise tax that the government adds on (let's say $2). Imagine the government nationalizes the liquor business. The buy up every liquor company, and continue operating them the same way as before ($10 price + $2 tax). I think anyone would agree that this $2 would still be considered a tax. Now let's say the government gets rid of the $2 tax, but bumps the price of liquor up to $12. The tax is still there, it's just implicit now.
      - aianus 11y ago
        > Imagine the government nationalizes the liquor business. I live in Toronto, no need to imagine :(
        green7ea 11y ago
        If only it was simply 2$ and not what is closer to 10$.
    - morgante 11y ago
      Are liquor taxes not taxes? You can absolutely avoid paying them by not drinking, and millions of people indeed do just that, but the fact that a tax is easily avoidable does not make it any less of a tax.
      - Retric 11y ago
        There are huge negative externalities to liquor which muddles the issue. If not forcing people to pay a carbon tax is a subsidy then the 'liquor' tax may not be an economic tax. https://en.wikipedia.org/wiki/Externality https://en.wikipedia.org/wiki/Externality Gas taxes are perhaps the clearest example of this where you can directly compare revenue with costs.
    - Asbostos 11y ago
      The "tax" part of the lottery is a component of the gambling part. The gambling part is the product people pay for. Just like a tax on cigarettes, or in some countries a tax on every consumer product (VAT). You can always avoid the tax by not buying the product or reduce it by buying cheaper products, but we still call it a tax.
  - smoyer 11y ago
    Here in Pennsylvania, only the state can sell liquor (with a few exceptions - e.g. bars can sell drinks and producers can sell their wares which are generally wine here).
- tsotha 11y ago
  Yeah. There's a big semantic difference between saying something is a tax and saying something is taxed.
- eveningcoffee 11y ago
  You played or someone broke your legs or burned down your house. Last time I checked, no state is doing anything like that. I think that the major difference comes from the magnitude of the power. You are describing two possible measures: reducing somebodies mobility and destroying financial situation. State can in both situations be a lot of more effective and therefore offer better competition against the mafia. If a State wants to reduce somebodies mobility, it will arrest this person. In many cases this can be extended to eternity. A state can be also more efficient in the second case - instead of burning down the house, state can just confiscate it.
  - fredkbloggs 11y ago
    Yes but can you provide a single instance in which the state did any of those things because someone chose not to play the lottery? I'm usually the first guy ranting about excessive state power. I won't be hard to convince. Convince me.
- lotu 11y ago
  What about sales tax? Is that not a tax? After all buying things is voluntary, you could (and some people do) live a self sufficient lifestyle and not have to pay any sales tax.
- pjlegato 11y ago
  > You played or someone broke your legs or burned down your house The Mafia didn't force people to play their numbers games. They didn't need to. There were more than enough willing and voluntary participants.
sliverstorm 11y ago
The main counter I would offer... There's also the simple well established precedent of vice taxes.
- Guvante 11y ago
  It is an interesting philosophical question of whether vice taxes are a good thing however given this result of those vice taxes. (I am generalizing a bit as cigarettes and alcohol are also vice taxed and also lead to the same problems as lotteries).
  - oh_sigh 11y ago
    Vice taxes only make sense if they reduce the likelihood of someone committing the vice. Otherwise it's just profiteering(especially when the tax funds aren't pumped back into, say, anti-vice programs).
    - Guvante 11y ago
      Economically vice taxes always reduce consumption. Determining whether reality matches that prediction is probably an open field of study at this point.
notahacker 11y ago
I think it's a stretch of the imagination to suggest that lottery players would be better off at all if they removed the "excise tax" by opening it up to competition. One of the characteristics of monopolies is they tend to profit by selling fewer units than a competitive market does, and fewer lottery tickets sold is a good thing for gamblers. The comparison to casino games in the article is particularly unhelpful, since the reason why most casino games have low house edges is nothing to do with competition and everything to do with being designed to encourage bigger and more frequent bets by deluding the gambler into believing their small wins are cancelling out their small losses. A roulette player loses 5.3% per spin, not per week, and since bets are sequential and games fairly rapid, a weekly session at a casino don't even have to be unusually long for expected losses to approach 35-55% of the amount bet; the same proportion of principal the participant could otherwise have expected to lose on buying tickets for that week's lottery. But because of the structure of the returns, people tend to bet more in casinos, and they can spend all day every day there if they want to. Bookmakers for horse racing are actually in a more competitive market than casinos in most areas but have much bigger house edges, because races can only happen so fast. Lotteries are at the other end of the scale, marketing the dream of a weekly opportunity to achieve massive lifestyle changes to people whose decision to play isn't at all affected by whether they can remember ever winning anything from it, and probably have no idea of the expected return from the game they play And allowing people three different privately-run massive dream jackpots to pursue is probably going to encourage them to buy more tickets. This means that even if margins do come down as a result of competition - despite participants' indifference to expected return and marketers' active avoidance of the subject - a lottery player tempted to buy a ticket in each of three competing weekly lotteries is almost certainly worse off than they would have been had there just been a single lottery in town (and they been happy to settle for a single ticket per week). It seems certain that new entrants pushing similar products will increase rather than decrease the amount wasted on lotteries; demand for lottery tickets simply isn't elastic enough with respect to expected return[1] for the alternate scenario of them succeeding by cannibalising the state lottery's business with juicy jackpots to make sense. [1]if it was elastic with respect to expected return, demand would be negative!
- murbard2 11y ago
  It's not clear that's the case. My own intuition would be that demand for lotteries is inelastic because of scope insensitivity. There's essentially no difference between a $7 ticket for a chance at winning a $400M prize, and a $7 ticket for a chance at winning $500M prize. I would speculate that people will spend a fixed amount on lottery somewhat irrespective of the odds. That also means that liberalizing lotteries wouldn't particularly help most poor either... I do see one potential for a lottery that could diminish lottery spending. A lottery that you pay for only once in your life, and that automatically enters you for a daily drawing every day, for the rest of your life. The odds of winning would be adjusted accordingly, but people would still get the thrill everyday that today, maybe, they could win.

fredkbloggs 11y ago

Yes, but still. The essence of a tax is its involuntary nature. The mafia's numbers racket was a tax, or would be but for the mafia's lack of legitimacy (if you consider being a legitimate government a precondition for levying a tax). You played or someone broke your legs or burned down your house. Last time I checked, no state is doing anything like that. There are many things wrong with state-run lotteries, but they're not a tax. If you don't like the way the lottery is priced, don't play. Your kneecaps won't know the difference.

murbard2 11y ago
If tomorrow the government decides only it can sell gasoline, and it does so with a 35% margin, that's strictly more restrictive than an excise tax.
- fredkbloggs 11y ago
  I'm not saying that state monopolies are good. I'm saying that people need to get over the idea that everything they dislike or disagree with is "a tax". It isn't. A state monopoly on fuel would be almost impossible to avoid, and you could reasonably assert that it's a tax (there would be debate, but your position would be reasonable). After all, even if you don't yourself consume fuel, almost every product you could possibly buy has to be transported from somewhere, and most transportation services available today use fuel. A lottery is nothing like that. The product, such as it is, does not form a component of the cost of any other product. All you have to do to avoid giving the state money is not play the lottery, which should be very easy since they are very up front about the fact that a ticket is not only -ev but much more -ev than any casino or cardroom game you could possibly play. If people stopped playing, the state would either give up its monopoly or (in a classic monopoly-monopsony dynamic) cut its prices. And in the meantime, ex-players would be better off as well.
  - mgalka 11y ago
    Sounds like we are just talking semantics. When you buy liquor, you pay the market price (call it $10) plus an excise tax that the government adds on (let's say $2). Imagine the government nationalizes the liquor business. The buy up every liquor company, and continue operating them the same way as before ($10 price + $2 tax). I think anyone would agree that this $2 would still be considered a tax. Now let's say the government gets rid of the $2 tax, but bumps the price of liquor up to $12. The tax is still there, it's just implicit now.
    - aianus 11y ago
      > Imagine the government nationalizes the liquor business. I live in Toronto, no need to imagine :(
      - green7ea 11y ago
        If only it was simply 2$ and not what is closer to 10$.
  - morgante 11y ago
    Are liquor taxes not taxes? You can absolutely avoid paying them by not drinking, and millions of people indeed do just that, but the fact that a tax is easily avoidable does not make it any less of a tax.
    - Retric 11y ago
      There are huge negative externalities to liquor which muddles the issue. If not forcing people to pay a carbon tax is a subsidy then the 'liquor' tax may not be an economic tax. https://en.wikipedia.org/wiki/Externality https://en.wikipedia.org/wiki/Externality Gas taxes are perhaps the clearest example of this where you can directly compare revenue with costs.
  - Asbostos 11y ago
    The "tax" part of the lottery is a component of the gambling part. The gambling part is the product people pay for. Just like a tax on cigarettes, or in some countries a tax on every consumer product (VAT). You can always avoid the tax by not buying the product or reduce it by buying cheaper products, but we still call it a tax.
- smoyer 11y ago
  Here in Pennsylvania, only the state can sell liquor (with a few exceptions - e.g. bars can sell drinks and producers can sell their wares which are generally wine here).
tsotha 11y ago
Yeah. There's a big semantic difference between saying something is a tax and saying something is taxed.
eveningcoffee 11y ago
You played or someone broke your legs or burned down your house. Last time I checked, no state is doing anything like that. I think that the major difference comes from the magnitude of the power. You are describing two possible measures: reducing somebodies mobility and destroying financial situation. State can in both situations be a lot of more effective and therefore offer better competition against the mafia. If a State wants to reduce somebodies mobility, it will arrest this person. In many cases this can be extended to eternity. A state can be also more efficient in the second case - instead of burning down the house, state can just confiscate it.
- fredkbloggs 11y ago
  Yes but can you provide a single instance in which the state did any of those things because someone chose not to play the lottery? I'm usually the first guy ranting about excessive state power. I won't be hard to convince. Convince me.
lotu 11y ago
What about sales tax? Is that not a tax? After all buying things is voluntary, you could (and some people do) live a self sufficient lifestyle and not have to pay any sales tax.
pjlegato 11y ago
> You played or someone broke your legs or burned down your house The Mafia didn't force people to play their numbers games. They didn't need to. There were more than enough willing and voluntary participants.

sliverstorm 11y ago

The main counter I would offer... There's also the simple well established precedent of vice taxes.

Guvante 11y ago
It is an interesting philosophical question of whether vice taxes are a good thing however given this result of those vice taxes. (I am generalizing a bit as cigarettes and alcohol are also vice taxed and also lead to the same problems as lotteries).
- oh_sigh 11y ago
  Vice taxes only make sense if they reduce the likelihood of someone committing the vice. Otherwise it's just profiteering(especially when the tax funds aren't pumped back into, say, anti-vice programs).
  - Guvante 11y ago
    Economically vice taxes always reduce consumption. Determining whether reality matches that prediction is probably an open field of study at this point.

notahacker 11y ago

I think it's a stretch of the imagination to suggest that lottery players would be better off at all if they removed the "excise tax" by opening it up to competition. One of the characteristics of monopolies is they tend to profit by selling fewer units than a competitive market does, and fewer lottery tickets sold is a good thing for gamblers. The comparison to casino games in the article is particularly unhelpful, since the reason why most casino games have low house edges is nothing to do with competition and everything to do with being designed to encourage bigger and more frequent bets by deluding the gambler into believing their small wins are cancelling out their small losses. A roulette player loses 5.3% per spin, not per week, and since bets are sequential and games fairly rapid, a weekly session at a casino don't even have to be unusually long for expected losses to approach 35-55% of the amount bet; the same proportion of principal the participant could otherwise have expected to lose on buying tickets for that week's lottery. But because of the structure of the returns, people tend to bet more in casinos, and they can spend all day every day there if they want to. Bookmakers for horse racing are actually in a more competitive market than casinos in most areas but have much bigger house edges, because races can only happen so fast. Lotteries are at the other end of the scale, marketing the dream of a weekly opportunity to achieve massive lifestyle changes to people whose decision to play isn't at all affected by whether they can remember ever winning anything from it, and probably have no idea of the expected return from the game they play And allowing people three different privately-run massive dream jackpots to pursue is probably going to encourage them to buy more tickets. This means that even if margins do come down as a result of competition - despite participants' indifference to expected return and marketers' active avoidance of the subject - a lottery player tempted to buy a ticket in each of three competing weekly lotteries is almost certainly worse off than they would have been had there just been a single lottery in town (and they been happy to settle for a single ticket per week). It seems certain that new entrants pushing similar products will increase rather than decrease the amount wasted on lotteries; demand for lottery tickets simply isn't elastic enough with respect to expected return[1] for the alternate scenario of them succeeding by cannibalising the state lottery's business with juicy jackpots to make sense. [1]if it was elastic with respect to expected return, demand would be negative!

murbard2 11y ago
It's not clear that's the case. My own intuition would be that demand for lotteries is inelastic because of scope insensitivity. There's essentially no difference between a $7 ticket for a chance at winning a $400M prize, and a $7 ticket for a chance at winning $500M prize. I would speculate that people will spend a fixed amount on lottery somewhat irrespective of the odds. That also means that liberalizing lotteries wouldn't particularly help most poor either... I do see one potential for a lottery that could diminish lottery spending. A lottery that you pay for only once in your life, and that automatically enters you for a daily drawing every day, for the rest of your life. The odds of winning would be adjusted accordingly, but people would still get the thrill everyday that today, maybe, they could win.