Why aren't lottery tickets subject to sales tax?
When I read about the middle class paying most of the tax in what the press calls "1% 99%" I wonder who buys lottery tickets and why. It is my opinion that the usual consumer of lottery tickets is the person who can least afford to buy one. Buying a lottery ticket is a moral hazard and has a low marginal cost of acquisition. Liquor and cigarettes are taxed to stop people from buying these goods that have harmful effects on the consumers. Lottery tickets should be taxed too.
Sales taxes are a regressive tax as the percentage of income paid by the consumer is greater for a low income earner than for a high. That's why food isn't taxed. But the person most likely to buy a lottery ticket is a low income earner so imposing no sales tax on this consumer increases the likelihood that the low income earner will purchase a ticket. Why does the state encourage this behavior?
By imposing a sales tax on lottery tickets, the public would get a clearer picture of who pays the tax. In addition, lottery tickets are inelastic so a larger portion of the tax burden would fall on the buyer.
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