April 02, 2006

North Carolina: Is a Lottery a Tax?

Perhaps the most interesting story behind the new North Carolina lottery is a failed lawsuit that sought to prevent the implementation of the lottery on the grounds that it was a new tax, and that lawmakers failed to follow special procedural rules required for tax hikes. (NC lawmakers must vote on tax legislation over a period of three separate days, according to the state constitution.)

The judge in the case ruled that the lottery was not a tax because a tax is "a forced contribution to government which has no necessary immediate relationship to a benefit conferred." And nobody holds a gun to anyone's head to play the lottery, so it must not be a tax.

Of course, by this measure there are plenty of "taxes" in North Carolina that really aren't. As the Greensboro News & Record puts it:
The state doesn't force anyone to purchase gasoline, cigarettes or beer, yet it imposes a gas tax, cigarette tax and beer tax.
It's an interesting point: lawmakers aren't choosing the lottery to fund schools because they think it's a great idea, they're doing it because it's easier than raising taxes. The North Carolina lawsuit asks the important question: why should this be easier than raising taxes?


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