A Stitch in Haste

(Guest-posted earlier today at Freespace.)

The Tax Foundation has released a major background paper today titled "Lotteries and State Fiscal Policy" (pdf file) that collects, sifts and packages the data regarding various state gaming schemes.

One particular passage caught my eye:

Lottery proponents often argue that a tax is a mandatory or compulsory payment and lottery purchases are voluntary, so the lottery cannot be a tax. This argument overlooks the fact that the purchase is voluntary, not the tax, just as a sales or excise tax is compulsory on a voluntary purchase. A mandatory tax on a voluntary purchase is still a tax.

In fact, all taxed purchases and activities are technically voluntary. The same argument applies to the sale of alcohol or tobacco: one is no more required to purchase a lottery ticket than to purchase alcohol or tobacco, yet excise taxes on alcohol and tobacco are still considered taxes.

I'd phrase that differently. Playing a lottery may be voluntary, but playing a government lottery is not voluntary if the government prohibits private lotteries from competing with it. If the state uses its power to monopolize the lottery industry and therefore captures excess profits that it would not otherwise have reaped had it allowed competition, then yes I think it's fair to classify those excess profits as an "involuntary tax."

My guess is that those who would posit a Utopian realm where the only government revenue is lottery profits (and perhaps user fees) have not fully thought this issue through -- is a government financed through a monopolized lottery any more libertarian than one that imposes other tax systems? (Assume the government is in all other ways "libertarian" -- it only engages in proper "libertarian" government functions, does not redistribute wealth or income, and seeks to raise only the bare minimum revenue required.)

Or is the presumption simply that the government would in fact freely compete with private lotteries? Is such a premise viable?

The Virginia Lottery's "Pick 4" drawing on Thursday night came up 0-0-0-0. Because "quadruple numbers" are common plays, lottery spokesman John Hagerty said Virginia Lottery paid out $3.27 million in winnings on a "Pick 4" drawing that had sold about $280,000 worth of tickets.

An estimated 650 people played 0-0-0-0 in last night's "Pick 4" game.

Hagerty said this marks the first time the 0-0-0-0 numbers have come up since the "Pick 4" game was began in 1991. The last "quadruple numbers" to come up was 1-1-1-1 on Jan. 15, 2007.

The odds of any specific four-digit combination coming up in the drawing are approximately 10,000-to-1.