California’s lottery is a regressive tax that rips off citizens. Lawmakers need to end it

In June 2019, the editorial board of The Sacramento Bee called for reforms in the payday loan industry, asking “How much greed is enough? That’s the question legislators in Sacramento must ask the predatory loan industry — and themselves.”

When the reform legislation Assembly Bill 539 passed and was signed by Gov. Gavin Newsom that year, mandating licensing and regulation of lenders, legislators patted themselves on the back for protecting consumers from financial predators. They were right to act. The payday loan industry was a legalized racket that profited from poor financial decision-making by low-income Californians.

For all the same reasons, legislators should take steps to shut down the California Lottery.

Opinion

It’s not a stretch to say the California State Lottery is a tax on poor Californians. After all, a state entity collects revenue, nominally for education, by selling the false promise of enrichment. Study after study shows that the people falling victim to this Ponzi scheme are the lowest socioeconomic groups in our state. In a 2012 study, researchers found that the poorest 20% of residents had the “highest rate of lottery gambling (61%) and the highest mean level of days gambled in the past year (26.1 days).”

When you extrapolate those findings to the populations and scale of the California Lottery, it becomes clear that most of the revenue generated is coming straight from the pockets of poor, less educated Californians.

While many are convinced that buying a lottery ticket is an investment, doing so is just plain illogical. From an economics perspective, we should consider the expected value of purchasing a $1 lottery ticket. Given the one-in-hundreds-of-millions chance of winning the lottery, the expected value of the $1 expenditure is far less than $1, and that is before considering the huge tax bill that comes with a large victory.

Yet according to a 2019 study, 75% of lottery players believe they will win a cash prize. Previous studies have shown that the lower the income of the respondent, the higher the misguided belief of winning the lottery. That is not a surprise, as the California Lottery spends hundreds of millions of dollars on advertising designed to sell that false narrative.

The state lottery will highlight $37 billion sent to public schools. But at what cost and from whom? If the sole point of the lottery is to fund schools, then this is the most regressive tax in California history.

In a state that prides itself on its deep commitment to equity, how can we continue to allow low-income families to bear the brunt of this supposedly critical line of funding?

Perhaps most troubling, the lottery presents a false idea that people can gamble their way out of poverty. That economic mobility occurs as a matter of chance.

Economic anxiety has dominated American politics over the past decade. Many Americans are doubting whether the next generation will be better off than those that came before. The California Lottery knows this and feeds off that anxiety. This is entirely counterproductive to the goal we should all share: expanding economic mobility for all.

To lift people out of poverty, which also would have the effect of raising revenue for the state, perhaps we should instead make a much safer wager — one that invests in entrepreneurship and educating Californians on how to make better financial decisions.

Matt Rexroad is a California political consultant with expertise in redistricting and independent expenditures. He is a former Yolo County supervisor.