Mississippi’s traditional brick-and-mortar retailers are having a tough enough time trying to adjust to the growing competition of online shopping.
Now, it appears some in state government want to add to merchants’ headaches by diverting some of consumers’ discretionary money to a state lottery.
Last week, a special legislative panel heard that a state lottery would have a detrimental effect on much of the retailing community. About the only retailing segment that would benefit are convenience stores, which are big supporters of the lottery because of the extra traffic it could bring to their locations.
It probably, though, won’t be so good for those who sell clothes, groceries, hardware and other normal necessities of life. That’s because, according to State Economist Darrin Webb, lotteries don’t create much new economic activity. Rather, they cannibalize what’s already existing. The main victim, he said, would be retail sales.
He estimates the drop in sales tax collections alone would be around $20 million a year on roughly $300 million less in retail sales. That’s not counting what the impact might be on lost wages, as stores contract to offset declining sales, and the income taxes paid on those wages.
Overall, Webb predicted, a lottery would bring in more revenue to the state treasury than it would lose, but it would also result in a slight decrease in economic activity — not exactly what Mississippi needs as it still struggles to rebound from a recession that has gone on for a decade.
The lottery’s detrimental effect on the economy — and in particular one already challenged part of it — is yet another reason why Mississippi should drop this folly.
A lottery is one of the most inefficient and morally suspect ways that a government can raise money to fund its operations. It costs more than 70 cents to raise a dollar in lottery revenue, compared to 1 cent to raise a dollar in regular old tax revenue. A lottery takes advantage of those who can least afford to spend their money on it. It hurts existing businesses. And it really doesn’t raise that much money.
The current estimate for Mississippi is that a lottery, once everything is taken into consideration, would net around $80 million to $90 million a year in additional revenue for the state coffers. That’s not enough to pay for a fourth of all the highway and road maintenance this state needs to catch up on, nor would it close most of the funding gaps this state has for education, health care or other essential services.
The lottery is an idea that looks worse the more it’s studied.