Simple evidence that gambling (rather than just lotto) is a tax on poor people - check out where the gaming/'slot' machines are. Last time they ran the map in the paper, the venues were heavily clustered in the poorer northern and western suburbs of Melbourne, with another cluster down in Frankston.
Then of course there's the simple point that less money comes out of lotto than goes in, simply to pay for overheads and profit of the gaming company (as with all gambling) plus a bit of tax on the ticket. The ticket sale simply can't be a zero-sum game; less has to make it back to the winners than was paid in the first place.
That being said, I also pay the idiot tax every month or two, and for the same reasons as the author - entertainment.
By this line of reasoning, anything that is more popular among poor people is a tax on them? People pay to gamble to get something in return (entertainment as you say) and that makes it not a tax. It is quite natural that the gaming company makes a profit on that, just like, say, a movie theater company.
There is certainly some truth in the vision of the poor guy being a more vulnerable gambling victim but I would not generalize that to non-addicts. Gambling vs. other kinds of entertainment is a matter of personal preference.
Actually gambling is quite popular among rich people, in the form of financial speculation...
By this line of reasoning, anything that is more popular among poor people is a tax on them?
The argument is that gambling houses are taking advantage of people's poor education to bilk them out of money. In principle, everyone in developed nations should know that gambling is a poor investment, but it takes good financial sense to really understand that. People with good financial sense usually aren't very poor.
At low income levels, taxation is generally low. We've tended to avoid flat income taxes because they impact those with low-incomes more than high-incomes because poor people spend a higher percentage of their money than rich people.
So when you look at how poor people spend money, the rational economist would never advocate spending the money on the lottery. The utility is low, and even if the expected value is positive, the variance makes it a bad idea. Poor people would be better off spending money on things with greater returns.
The problem is that poor people don't spend their money on things with greater returns. They spend far too much of their money on lottery, and it's probably combination of psychological factors and financial illiteracy. I could be off on this, but I remember a statistic showing that there isn't much deviation on how much money any random household spends on the lottery. So a household with $100,000 in incomes spends as much on the lotter as a household with $20,000 in income. The result is that the lottery has become a regressive tax.
So when you look at how poor people spend money, the rational economist would never advocate spending the money on the lottery. The utility is low [...]
This misses the point of the article, which is that gambling should not be regarded as an investment, but as entertainement. But I agree that poor people are possibly more likely to see it the wrong way, i.e. as a good investment.
The result is that the lottery has become a regressive tax.
By the same argument you can conclude that potatoes are a regressive tax since they cost a higher fraction of the poors' revenues.
When you give money to the government with nothing in return (except as a member of the collectivity), that is a tax. Not when you give money to a private company in exchange for some kind of entertainment.
When there is a high jackpot, it almost is a break even proposition.[1] Of course this is not zero-sum in the medium term because this situation only occurs because it was not won previous weeks. It takes a jackpot of around $120m to be 'fair' (on the powerball lottery).
That ignores taxes and multiple winners. The Megamillions jackpot hit 640 million and it still had negative expected value. There happened to only be 3 winners, but there could have easily been far more than that.
PS: Powerball tickets also cost 2$ now which means you need a larger jackpot to break even.
Then of course there's the simple point that less money comes out of lotto than goes in, simply to pay for overheads and profit of the gaming company (as with all gambling) plus a bit of tax on the ticket. The ticket sale simply can't be a zero-sum game; less has to make it back to the winners than was paid in the first place.
That being said, I also pay the idiot tax every month or two, and for the same reasons as the author - entertainment.