A lottery is a tax on the poor, so you’d think Nevada would already have one

It’s weird that Nevada doesn’t have a lottery. 

No, not because we’re already up to our eyeballs in gambling so duh why not some more. (And as you know that industry’s whiny disdain for the competition is why we don’t have a lottery).

The reason it’s weird Nevada doesn’t have a lottery is that, as one pair of economists put it citing 17 different studies of lotteries in multiple states over a span of 35 years, “With little exception, research has shown that these lotteries are a highly regressive form of public revenue generation, in that purchases do not increase proportionate to individual or aggregate income.”

In other words, the lower one’s income, the larger percentage of their income they spend on lottery tickets.

Like a moth to a flame, Nevada is drawn to public revenue sources that hit low income people harder than everyone else. That’s why the regressive sales tax – not the gaming tax – is the largest single source of state general fund revenue.

How powerful is the gravitational pull of regressive policy in Nevada? Progressives, liberals and others who are concerned about economic inequality typically disapprove of revenue sources that rely disproportionately on lower income households, and instead champion revenue sources that place more of a burden on those who are best equipped to comfortably bear it.

Yet in Nevada, some of the state’s most notable progressive organizations, including two that actually have “progress” right there in their names, along with the state’s most powerful labor unions – groups that usually (but not always) identify with progressive economics – are all backing … a lottery.

At the same time, neither they nor their Democratic legislative allies are pursuing progressive revenue measures such as raising the lowest-in-the-nation gaming tax, or creating a business income tax. They haven’t even shown an interest in taxing what promises to be Nevada’s most lucrative mineral of the future, lithium, at the same rate as Nevada taxes gold.

Well, in fairness, those things are hard.

A lottery’s easy peasy. Or as Culinary Union Local 226 Secretary-Treasurer Ted Pappageorge described it in an interview, “doable.”

Get it on a ballot and it’ll sail through.

That’s why the lottery ticket is the global universal symbol for policymakers the world over who, after briefly considering the work and political risk involved in building and making a public case for sounder and more fair means of funding government services,  give up and say “hey kids let’s have a lottery.”

And relying on low income people to foot the bill for public services? Why that, to borrow a phrase, is the Nevada way.

Pappageorge said he doesn’t necessarily disagree with research indicating lotteries earn a disproportionately large portion of revenue from lower income people. “But,” he added, “the idea that we’re going to say no to this sort of revenue based on that – to me, that horse is out of the barn and left a long time ago. We’ve got gaming on every corner.”

That does explain why Las Vegas has so many 7-11s that don’t sell gas. In a car town. It’s also a good argument (though Pappageorge didn’t make it) for raising the tax on slot route operators who make the profits from all that gambling in convenience stores and grocery stores and laundromats and such.

And, the horse having left the barn, his point underscores why you’d think Nevada would have established a lottery as an unfairly regressive supply of public revenue a long time ago. 

We might get one soon.

Well, not too soon.

Scratch & lose?

The state constitutional amendment to allow a lottery that is supported by all those progressives, and that is wending its way through your Nevada Legislature with strong (but not unanimous) Democratic support, would need to be passed by that body this session

And then passed again during the next legislative session in 2025. 

And then be approved by voters in the 2026 election. 

And then state lawmakers “may” – not shall – enact laws detailing how the lottery would work, in the 2027 legislative session.

Assuming they do so, that would be followed by what would assuredly be a gruesome and probably agonizingly slow orgy of conniving and canoodling among the state’s most beloved movers, shakers, and power playing deal makers, culminating in some company being awarded the lucrative contract for administering the lottery.

And then when the lottery is up and running in 2029 or 2030 or whatever, if the Nevada experience is like that in other states, somewhere around 60% of the money spent on lottery tickets would go to the winners, around 5% would be paid to the retailers in commissions, and maybe another 5%, or more, would be paid to the one true lottery winner – the company that won the contract.

The maybe 30% that’s left over would go to the state, which then and only then would spend the money to address the very real and very urgent problem that the lottery’s supporters are so eager to address, Nevada’s inadequate mental health services for young people.

Unless the money is spent on something else.

The Culinary union and Assemblyman C.H. Miller, who are spearheading the proposal, say that’s where the money will go. But the proposal lawmakers are considering, and that voters would have to approve, doesn’t specify what the money would be spent on.

Asked about this curious omission during a committee hearing early this month, Miller said that if a mega-billionaire – he mentioned Elon Musk specifically – donates a billion dollars to mental health services, the legislature’s hands would be tied, and lottery money would still be directed to that purpose even though the mega-billionaire had it covered.

Pappageorge, when asked why the proposal doesn’t specify mental health, had a perhaps more realistic answer: It was on the advice of counsel.

Well, that makes sense – the more there is in a proposed constitutional amendment, the more there is for the gambling industry to sue over in an attempt to keep it off the ballot.

“But we’re not being shy about what this is for,” Pappageorge added.

Miller, Pappageorge and the lottery’s other backers are absolutely right that services for youth mental health, like all mental health services in Nevada, are woefully in need of urgent attention.

So assuming (going out on a limb here) Musk doesn’t donate a billion dollars to Nevada to pay for youth mental health services, state revenue generated by Nevadans buying lottery tickets will almost certainly pay for youth mental health services? Answering in the affirmative requires another assumption: If and when the lottery becomes operational and the state starts collecting revenue sometime around the start of the next decade, priorities pronounced several years earlier by people who may not even be there anymore will be honored, and the money won’t go to filling a budget hole. Or maybe building another sports thing.

But seriously, when the legislative session started, other than the insiders who knew it was coming, who had “lottery” on their Supercalifragilistic Legislative Ideas Bingo Card? Given the pernicious, even predatory nature of lotteries as a source of public revenue, from an objective policy standpoint, an argument could be made that the state already got lucky because unlike people in 45 other states, Nevadans haven’t been saddled with one. And however addictive lotteries might be to players, once a state government gets hooked on scratching and winning, they can never kick the habit.

Yet all the underlying public policy reasons not to have a lottery are exactly the reasons a lottery is pitch-perfect public policy for Nevada. Already sporting one of the nation’s most regressive and unfair tax structures, the state then moves to disproportionately dump even more of the cost of state government on those who can least afford it? That’s got Nevada written all over it.