The predatory state lottery
It’s not surprising that Mississippi’s Lottery Corporation hasn’t done any studies to determine who plays the state lottery and how big a chunk it takes out of the family budget.
It probably doesn’t want to know.
If it did the demographic research into Mississippi’s lottery players, it would most likely find that the biggest victims of this sucker’s bet are predominantly poor, with modest education and either Black or Hispanic.
That’s the story that gets shoved under the rug while states like Mississippi ballyhoo the big jackpot drawings such as Mega Millions, which this past week reached a potential payout of almost $1.3 billion.
The Howard Center for Investigative Journalism at the University of Maryland recently published its findings on the winners and losers of lotteries in the 45 states and the District of Columbia that operate the government-sanctioned games of chance.
The big losers are the players, who on average get just 65 cents back for every dollar they gamble — a 35% loss on their investment. In Mississippi, the return is even worse: 44 cents lost for every dollar spent, most of which is plopped down on the instant results of scratch-off games.
Because most states don’t do demographic research on their players, the Howard Center had to try to determine their makeup by proxy, looking at where lottery retailers are located on the assumption that they’d be close to where most of their customers live. They were able to confirm this assumption by also analyzing cellphone location data of lottery players.
The study’s conclusion was that lottery retailers are disproportionately clustered in low-income communities with large minority populations.
Mississippi, according to the data, followed this pattern but imperfectly.
As elsewhere, lottery retailers in Mississippi tended to be located in areas with a higher poverty rate, but not overwhelmingly so. However, when it comes to race, the difference was dramatic.
Those areas in the state with lottery retailers had a median Black population of 41%. In areas without lottery retailers, the Black population dropped to 30%.
That 11-point gap was “one of the biggest we observed anywhere,” said Sean Mussenden, the data editor for the Howard Center.
The only states with racial gaps that large or larger were South Carolina and Georgia, plus the District of Columbia.
South Carolina offers a good indication of what might be the case in Mississippi. A 2014 study found players with a household income of less than $35,000 a year spent more than twice as much on the South Carolina lottery than players with household incomes between $100,000 and $150,000.
Texas, which is a rarity in commissioning a demographic study of its lottery players at least every other year, has found a similar disparity based on education level. Median spending by those without a high school diploma is almost twice as high as those with a college degree.
Lottery promoters know who is most likely to be enticed by the hope of striking it rich, and they target their marketing to them.
“They prey on people’s hopes because there are a lot of people in this country that are hurting,” David Surdam, a professor of economics at the University of Northern Iowa who has written critically about lottery marketing, told the Howard Center’s reporters. “They figure their chances of ever having real prosperity are pretty slender and the lottery may be the only hope they have.”
Mississippi’s lottery was sold on the premise that it would be a popular way to raise money for important public needs. Under Mississippi’s lottery law, the first $80 million of proceeds is transferred to the state Department of Transportation for road and bridge construction and repair. Anything above that goes to public education.
For the year ending June 30, the total proceeds came to about $123 million. Sounds impressive, but it’s really not. Not only were the proceeds down 11% from the year before, but the lottery is a terribly inefficient way to pay for government. After deducting for prizes, advertising, administration and commissions to the retailers, Mississippi nets just 27 cents of every dollar spent on lottery tickets. That compares to 99 cents netted for every dollar collected in traditional taxes.
The lottery has been part of a strategy by Mississippi policymakers to shift more of the cost of government onto the people who can least afford to pay it. It fits nicely into the Republican effort to reduce income and corporate taxes, which mostly target the wealthy, and instead raise consumption taxes, which hit hardest on those at the lower end of the income ladder.
Ironically, the lottery’s creation in 2018 had the backing of a number of Democrats, including that of a state legislator and longtime lottery proponent, Rep. Alyce G. Clarke, for whom the law is named.
These legislators should have known the lottery would take advantage of many of their constituents. It is shameful that they went along.