Federal Tax Freedom Day comes on April 17th this year. Since Tax Freedom day tells us “how much we are paying for our government,” the April 17th date means that, on average, Americans will pay 29.1 percent of their income for government at all levels.

The state of North Carolina ranked 32nd among the states and D.C. in tax freedom in 2004. North Carolinians started working for themselves, rather than the government, on April 7th last year, but will have to wait until April 12th in 2005. That puts North Carolina in 31st position in 2005.

But that’s not all. With the addition of a lottery, the state would like you to give just a little bit more, please, in the form of dollars for lottery ticket sales. Disputed claims about net revenues are unlikely to sway legislative enthusiasts for the lottery.

The claims upon which the lottery proposal was argued, and so far approved, offer the prospect of a government-run gambling monopoly (virtually) in the state. We should consider the standard economic arguments for and against monopoly providers of services and products when we look at how this system will operate.

Consider first that government-run monopolies do not face the same incentives as do privately-created competitive businesses.

Rivalrous firms can become the single (monopoly) provider in a market by outcompeting everyone else. This means that they have served the consumer better than their rivals. It also means that they must continue to serve them best, or new firms will come along and capture some or all of their business.

Government created monopolies, however, enjoy legal protection from competition with an exclusive supply privilege. The state lottery would effectively do this in the gambling industry. There is no better way to create a climate for irresponsible behavior than to grant an exclusive privilege that cannot be challenged in the market—no matter who or how honorable the provider is. The more numerous the providers of any service in a market, the less likely that abuses by one provider will go unchecked.

Since the Legislature has signaled that it is willing to legalize gambling, we should make gambling competitive and legalize it for all agencies that want to give it a try. It makes economic sense to open up the gaming-for-money industry in North Carolina to all comers, in the interests of competition and better services for consumer/gamblers.

There are many non-profit organizations that could benefit from Bingo, 50-50 raffles, and the like, for example, but cannot now do so legally. Schools, churches, and civic organizations would have a broader range of fundraising options if they become broadly legal in the state. The gambling route, while it will remain unattractive to some organizations, could significantly ease financial burdens and provide directed benefits—in line with the missions and community objectives of many non-profit groups.

If anything, cost/payout considerations are greater for small, independent organizations that do not benefit from a statewide distribution system, or have tax dollars to pay their employees, than they are for the state. We can safely let it be each group’s problem to figure out how “worthwhile” gambling games are for them.

Last, a lottery will almost certainly be regressive in its heavy reliance on lower-income citizens for support. Even if it were not regressive, however, it will put more dollars in the hands of government. Unless government is the most efficient provider of the services and products it is supplying with the added revenues, a bigger state budget will not create as much value for citizens and taxpayers as if they simply spent the money—or not—on the goods and services for themselves.

So—we can make a little lemonade from a state-run lottery with some added state revenues, but it is unlikely to free us from the yoke of government any sooner next year, and that makes it a pretty sour choice.