GREENWOOD — Let’s imagine you’ve got a business, and you’re desperate to come up with a way to generate more revenue for it.
Your accountant presents you with two options.
With one you have to spend $70 to net $30.
With the other you have to spend $1 to net $99.
Which option would you pick?
This is not a trick question.
Yet, Gov. Phil Bryant and some in the Mississippi Legislature are leaning toward the first option by suggesting a state lottery might be a good way fund the repair and maintenance of roads and bridges.
As I wrote in this column last week, lotteries are terribly inefficient at raising government revenue, with states on average keeping just 30 cents of every dollar consumers spend on lottery tickets. The other 70 cents goes to the prizes, the advertising and the administration of the lottery.
I knew intuitively that the straightforward way to raise more money for roads and bridges — increasing the fuel tax — had to be more efficient than this. I just didn’t know how much more efficient.
So I checked.
The Mississippi Department of Revenue doesn’t break down administrative costs by tax type. For all the dollars they collect in taxes of all types, however, the administrative cost is less than 1 percent.
The cost of fuel-tax collections, if it could be broken out, may be even lower than this low average. That’s because Mississippi has one of the better systems in place when it comes to collecting the excise tax on fuel.
When a shipment of diesel or gasoline comes into the state, the refiner or the broker pays at that time the 18.4 cents per gallon of excise tax. Then, when the end user pays the same tax at the pump, the state credits the refiner or broker back.
In other words, the state gets its money up-front, before the first gallon of fuel is sold at the pump, then just swaps the revenue as convenience stores and other retailers collect from motorists and remit their collections to the Department of Revenue.
Besides being efficient, the fuel tax is a perfectly logical funding source for transportation infrastructure. Those who use the highways and bridges should be the ones who pay to maintain them.
Because fuel prices, after adjusting for inflation, are at a historically low point, most motor-ists would quickly adjust to an increase in the gas tax, even if the tax were doubled — the amount roughly it would take to produce the $375 million or so extra a year it’s estimated the state needs to start catching up on fixing or replacing deteriorating roads and bridges.
No one knows exactly how much a state lottery in Mississippi would raise, but it’s pretty certain it would come nowhere close to $375 million. Best guesses are between $85 to $100 million.
Proponents of the lottery like to call it a “voluntary tax,” but that’s an insult to the term “tax.” If any tax netted so little revenue after expenses, the public would be in justifiable revolt.
So why are conservatives such as Bryant suddenly so enamored with a lottery? Because they have painted themselves in a corner by cutting taxes willy-nilly, largely for their corporate friends, while ranting for years that any tax increase — no matter how sensible or meritorious — is evil.
Rather than getting the money back from the folks to whom they gave it away, they think it’s easier politically to shift the burden onto those who don’t hire lobbyists, who don’t donate to political campaigns, who don’t run misleading attack ads against them. And the beauty of the lottery for a cynical politician is that those getting conned — the poor and undereducated — don’t realize it.
Those who buy lottery tickets usually don’t calculate how bad their odds are of winning, and how good their odds are of making themselves poorer. They don’t know how or bother to do the math.
They, though, aren’t the only ones who fail to run the numbers.
Those advocating for the lottery haven’t done the math either.
Kalich is editor and publisher of The Greenwood Commonwealth.
