Monday, July 09, 2007

Affordability

Still catching up on the holiday week, I refer to a Boston Globe op-ed written by Derrick Jackson on July 7, in which he refers to "the abject addiction of the state to the lottery." He notes:

The average American spent $177 playing the lottery, more than the average spent on reading materials. Massachusetts is fifth in the nation in per-capital lottery spending at $700.

I had seen this number in previous years, but each time I do, I am blown away. That is $700 for every man, woman, and child in the Commonwealth of Massachusetts. According to the US Census, the average family size in Massachusetts is 3.14 people, so let's call that $2100 per family. (Since we don't buy tickets, some other family is covering our share in addition to their own.)

Back in 1990 or so, when I was running the local water and sewer system and needed to raise water and sewer rates to $800 per household to pay for sewage treatment plants to clean Boston Harbor and to replace decades-old water and sewer pipes, I was told that this was not affordable.

This past winter, when I chaired a citizens' commission suggesting that our home town pass an override to increase property taxes by a couple hundred dollars per year to repair and replace aging schools, fire stations, streets, and parks, some said that this was not affordable.

Most recently, I have seen some observers suggest that the now mandatory health insurance in Massachusetts of about $1200 per year is not affordable, and lots of studies have been done on this matter.

So what does affordability really mean? I know I am lucky enough not to have to personally worry about this. But lots of people do. Governors, legislators, and other policymakers have to stand in their shoes and make specific decisions about rates, taxes, and premiums, decisions that can indeed result in people making choices among food, clothing, shelter, and medicine.

But Mr. Jackson's column should prick all of our consciences. The lottery is a form of taxation that tends to be regressive, hitting the poor and working poor the most. It can encourage a type of gambling addiction because it offers hope, especially to the poorest. But the hope is illusory because no lottery survives if it pays out more than it takes in. As a friend once said to me as we walked through a fancy casino in Las Vegas, "This place was not built with our winnings."

We have decided that it is acceptable to impose this form of taxation to keep the cost of other public services "affordable." By any standard of affordability, this is a deceptive definition and, in Mr. Jackson's words, "a social crime." Bravo to him for the reminder.

10 comments:

Anonymous said...

Powerful.

Anonymous said...

Good post on this topic. You could apply this idealogy to a lot of issues facing our society. Priorities can get mixed up.

In the city of Quincy the mayor blamed the teachers for the High cost of health care insurance to gain political points with the tax payers as it is an election year in that city. Why are the wrong people always used as scapegoats?

Should we blame obese people or those who smoke for the high rates of health insuarance? clearly these people place a burden on the system. It's hard to know what is fair and logic.

Toni Brayer MD said...

Paul, you are right on about the lotto and its lure to poor citizens. Similarly, casinos have sprung up all over California and I'm not aware of anyone who has climbed out of poverty on the winnings of a slot machine. The plethora of lotteries and casinos is a seduction and a hollow promise that is hard for some people (millions of them) to resist. I have read that a person will change their primary care doctor if the copay is raised from $10 to $15. Apparently that is an amount that is "not affordable",

Anonymous said...

I am as anti-lottery as the next guy, but I don't see the logic in implying that there is hypocrisy here. Aren't you assuming that the people who complain about raising taxes are also the ones playing the lottery? I don't like my taxes raised, and I've never spent a dime on the lottery.

Anonymous said...

There is one additional factor involved here --- the lack of negative consequences to buying lottery tickets. As long as taxpayers are required to provide services for people who cannot pay for them (health care, welfare, etc.), then the folks at the bottom end of the income scale are not faced with an "either/or" problem --- whether they spend $1 or $400 per year on lottery tickets, those services are always available to them, free of charge.

Anonymous said...

I can't remember the exact quote, but when asked at his last stockholder's meeting about lotteries, Warren Buffett said he doesn't think much of a government that "preys upon the weaknesses of its citizens." He got a good round of applause.

BullandBearit said...

See, you have it all wrong. If people want to use the lottery as a pathway for the money they grant the government, why should you close this off.
I think that each income tax return should have a liitle block that allows the government to take maybe $5 or $10 more for a national lottery....the prize being no more taxes for the rest of your life.
On the one hand you want to take peoples gambling pleasure away from them, while on the other hand you want to tax us to death just to try to educate a bunch of ungrateful children.
of course, if parents would spend less time and money gambling and more on their children we could avoid converasations like this.
Regards -- De Foe

Anonymous said...

Paul,
This is not directed at you personally but well off people as a whole.

I find it funny that wealthier people will complain that we have to raise taxes to offer more government services or improve infrastructure yet those same people hire high priced CPAs to find ways to protect thier money from being taxed, find every last exemption and take advantage of every last loophole to avoid paying one red cent more in taxes than is necessary. These are the very people who are in the best position to give more to the government to help pay for those services and improvements to infrastructure, schools etc.
I remember Matt Damon decrying the Bush tax cut a few years back. He boldly declared that he would gladly give back his 5% cut. He would do so knowing that his CPA would find another place to save that 5%. The rich do not like to pay any tax and for someone like Damon to state that he would gladly give it back is being disingenuous.
There is no law that I am aware of that states that you cannot pay more in taxes than you are legally obligated to pay. Why don't more people send a check to the state or the feds for a few additional hundred or thousands of dollars to pay for those things they are advocating for. Maybe because those advocating for more taxes don't want to pay it themselves, but want someone else to pay it. And as usual it falls on the backs of the low to moderate middle class to foot the bill.
On the Mass tax forms we can choose to pay a higher rate. So few do yet there are so many who cry for the need for higher taxes.
For those who are looking for additional tax revenues for their towns, they can cut a check to the town for an amount above and beyond their real estate and excise tax. They should also enlist other well off folks in the community to do the same.
There are many who do not play the lottery or who may buy a ticket every now and then when Mega Millions or Powerball reach some ungodly figure that really can't afford to pay out a few extra hundred bucks every year.

Paul Levy said...

Excellent point. Thanks for making it.

I make those kind of donations specifically to non-profits involved in issues rather than the government. I fear that, if I give it to the government, it will just free up funds for something i don't care so much about.

Anonymous said...

What I notice in this society is a lack of ethics. When you lack ethics the rest is a piece of cake. I feel there is some types of profit that just are not worth the trouble, the harm out weight the benefit at is the lottery.