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Bill Would Authorize Payroll Withholding For Lottery Tickets

For every $1 dollar spent on the lottery, players lose 40 cents on average

Every week in Michigan, people buy millions of state lottery tickets. Rep. Beau LaFave wants to bring the legal form of gambling into a new setting — the workplace — and has introduced House Bill 6527 to do just that. If passed, the bill would authorize employers to withhold money from workers’ paychecks, with the money used “to hold a lottery,” in a form that the state lottery agency would devise.

Employees working for participating employers could choose to check a lottery withholding box, which would cause $26 to be withheld from their earnings each year and deposited into a new weekly payroll lottery.

“The thought process behind this particular game,” LaFave told Michigan Capitol Confidential, “is that you kind of have to go out of your way to play these games right now. If you make it easier to play these games, I think the majority of people would check the box to play.”

The Republican from Iron Mountain says the lottery revenue could help schools while stimulating the economy. Using ballpark figures, he said “If half (of workers) check the box (that’s) $100 millionish, half prizes, (and) half goes directly to the School Aid Fund. Then, further divide it down, that would be about a million dollars a week in prizes and a million dollars a week in the schools.”

With top prizes expected to be around $10,000, “Winnings are low, so nobody is quitting their jobs over it,” LaFave said.

LaFave did not address the economic impact of employees losing money, given that only 60 percent of lottery revenue is paid out in prizes.

LaFave said he got the idea years ago when considering how to bring the lottery to more people. “From a freedom perspective, which is how I look at everything, if people want to play the game, why not let them?”

Dean Stansel, an associate professor at Southern Methodist University, said government programs such as a lottery seldom are analyzed by what they cost in comparison to the benefits they provide.

“The idea that any government program is going to 'stimulate the economy' is based on the common error of only looking at one side of the ledger,” Stansel said in an email. “While there may be some measurable benefits from any particular government program, those have to be measured against the costs: what taxpayers would have done with that money if they’d been allowed to keep it. If you ignore that cost, any use of taxpayer funds seems beneficial, which of course it isn’t.”

J. Scott Moody, CEO of the Granite Institute think tank in New Hampshire, said that studies have shown that a lottery is a very regressive tax that puts a heavier burden on poorer taxpayers.

“This leads to conflicting and self-defeating policy such as providing help to the poor through schemes such as the earned income tax credit while at the same time burdening them through regressive taxation such as the lottery,” Moody said in an email. “This bill would do nothing to stimulate the economy. A person choosing to spend money on the lottery simply means they have less money to buy milk or gas.”

Leon Drolet, chairman of the Michigan Taxpayers Alliance, found the bill to be incredible. If the state was going authorize payroll withholding for something, Drolet wondered, why the lottery? he said.

“They don’t offer that for food or housing or any other product, so to suggest they do it for (a lottery) seems extremely bizarre.”

He continued, “It’s interesting that the state wants to facilitate purchasing such a colossal waste of money. Basically facilitating the worker becoming poorer at the benefit of the state.”