Powerball's Biggest Winner: Government

Ka-ching! Wednesday's Powerball jackpot soared to $1.5 billion as get-rich-quick mania seized America this week. But you don't need to wait for the drawing to know who'll score the royal payoff.

The biggest winner of the multistate numbers game is -- drumroll, please -- Uncle Sam.

Powerball is a government-sponsored gambling racket in 44 states, plus Washington, D.C., Puerto Rico and the Virgin Islands. The feds automatically skim 25 percent off the top of a lump-sum cash award. Additional state withholding taxes vary depending on residency status. Mega-winners are taxed at the highest federal income tax bracket (nearly 40 percent); those who live in states with personal income taxes could pay up to an additional 9 percent. Local municipal taxes can add another 3-5 percent to the tax burden.

Government lotteries of all kinds raked in a whopping $70 billon in revenue last year, according to the North American Association of State and Provincial Lotteries. Cash-strapped states pitch the rackets as civic enterprises by purporting to earmark a portion of proceeds for public education, economic development and mass transit, senior citizens' programs, professional sports stadiums and environmental protection.

As I've noted during previous, high-stakes lotto crazes, the state bureaucrats who run these schemes for numeracy-challenged consumers are free to ban outside competition -- including private slot machines, phone betting, instant pull tabs and card rooms. The feds help out by limiting sweepstakes and Internet gambling, as well as exempting state lottery marketing materials from Federal Trade Commission regulations that guarantee truth in advertising.

That's right. While cracking down on ads on everything from cereal to toothpaste to cars, Washington protects states that spend hundreds of millions of dollars every year falsely promising "a dollar and a dream," "everyone is a winner" and "somebody's gotta win -- might as well be you."

In New York last fall, the attorney general outlawed fantasy sports league as illegal games of chance that deceptively hooked in the gullible -- while the state lottery promoted its motto, "Hey, You Never Know."

I know double-standards sanctimony when I see it.

If public lottery pimps were private corporate entities, they'd be charged with predatory behavior. To entice their at-risk target audience of elderly citizens and low-wage workers, state officials saturate the airwaves around the first of each month. Why? As a candid advertising plan for the Ohio Super Lotto directed many years ago:

"Schedule heavier media weight during those times of the month where consumer disposable income peaks. ... Government benefits, payroll and Social Security payments are released on the first Tuesday of each calendar month.''

Billboards in Chicago slums claim lottery purchases could be your ticket out."" The Illinois lottery lures players to ""joy someone with holiday scratch-offs."" In Maine, an analysis by Cornell University and the Maine Center for Public Interest Reporting last fall found: ""For every one percent increase in joblessness in a given zip code, lottery sales jump 10 percent, the original research shows. And people in Maine's poorest regions spend as much as 200 times more person than those in wealthier areas."""

By enticing people to spend their money on fantasies, veteran gambling historian Robert Goodman points out, "governments are preying on people's ability to dream and hope. Rather than providing real hope for economic improvement, public officials are promoting the illusion of economic improvement-- becoming deeply involved in finding new ways of manipulating people's desire for a more secure future. They are enticing people into taking part in what should properly be called the 'pathology of hope.'"

The government gambling industry spins lotteries as good, innocent fun that benefits the children. Always "For The Children." But countless studies show two things:

First, a significant portion of lottery sales are driven by financial desperation and delusion, not by entertainment. During the 2008 recession, 29 of 42 states with lotteries saw huge spikes in lottery sales -- with sales records set in New York, New Jersey and Connecticut, where purchases are greatest in the states' poorest counties.

When people view themselves as doing worse financially, then that motivates them to purchase lottery tickets, Emily Haisley, a postdoctoral associate at the Yale School of Management who researched lottery behavior, told The New York Times. "People look to the lottery to get back to where they were financially."

Second, multiple investigations of states that divert a portion of lottery revenues to public education have shown that on average, those states spend a smaller proportion of their budgets on education than states that do not have a lottery.

Remember: All government revenue is fungible. Lottery funds end up supplanting regular income, not supplementing it. As players lose interest, the states must cut the number of prizes, make longer odds, inflate the jackpots and market even more aggressively (and deceptively) to make more money.

Government-run lottery monopolies are a regressive tax and a stupidity tax.

Inject this truth in inner-city Powerball billboard advertising: The odds are never in your favor.

Michelle Malkin is author of the new book "Who Built That: Awe-Inspiring Stories of American Tinkerpreneurs." Her email address is [email protected].

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