Friday, March 30, 2012

Why The Mega Millions Jackpot Is Nothing But Another Tax On America's Poor

Interesting viewpoint - lotteries are nothing more than a tax on the poor. At least the 'lotto tax' is a  voluntary tax.
Now that the Mega Millions Jackpot has just hit a record $640 million, people, mostly those in the lower and middle classes, are coming out in droves and buying lottery tickets with hopes of striking it rich. After all, with $640 million one can even afford a few shares of Apple stock. Naturally, we wish the lucky winner all the (non-diluted) best. There is, however, a small problem here when one steps back from the Sino Forest trees. As ConvergEx' Nicholas Colas explains, "Lotteries essentially target and encourage lower-income individuals into a cycle that directly prevents them from improving their financial status and leverages their desire to escape poverty. Yes, that’s a bit harsh, and yes, people have the right to make their own decisions. Even bad ones...Lower-income demographics spend a much greater portion of their annual earnings on lottery tickets than do wealthier ones. Since lotteries are state-run, that effectively means that the less affluent pay more in taxes (albeit by choice) than broadly appreciated. And even winning the lottery doesn’t guarantee financial success. More than 5% of lottery winners declare bankruptcy within 5 years of taking home the jackpot.

Read the rest here
Zero Hedge