Private-Sector Monopoly?!

(Geoffrey Lawrence/NPRI) – After reading Howard Stutz’s column in the Business section of the Las Vegas Review-Journal yesterday, I was appalled that such a basic ignorance of free enterprise would be published on the front page of any paper’s “business” section.

Stutz laments that any legislative proposal to implement a state-run lottery in Nevada would likely be dead on arrival.

Lawmakers have considered a state-run lottery in successive legislative sessions for decades, against the advice of their own consultants. A famed 1988 tax study commissioned by the legislature from Price Waterhouse examined this possibility and concluded:

Regardless of how popular state-run lotteries are becoming … the lottery fails both the equity and efficiency tests of a good tax system. Moreover, it has proven to be an unstable source of revenues over time.

At present the state’s private gaming interests have their own forms of lotteries (e.g. keno), and have the ability to create even more forms. Moreover, a state-run lottery fails every test of a “good” tax policy. In Nevada, gaming should be left to the private sector.

Nearly every nonpartisan analysis of state-run lotteries has drawn similar conclusions. State lotteries are an extremely regressive form of taxation, they unnecessarily introduce volatility into the tax structure and they generally fail to generate much revenue. Moreover – and this is the key – a state-run lottery would directly compete with the largest private-sector industry in Nevada.

Stutz identifies Boyd Gaming and Station Casinos as gaming companies that have opposed state-run lotteries because they want the “monopoly” on locals’ discretionary spending. That’s right – Stutz accuses two firms specifically of carving out a monopoly in a certain market. By definition, this is not a monopoly because there is more than one prominent competitor.

Apparently, Stutz believes that a monopoly exists whenever the government is not directly competing (on an uneven playing field) with private industry.

Stutz cites as examples states that run their own lotteries despite the presence of casinos, as if this provides evidence that a state-run lottery in Nevada would not be detrimental to the state’s most significant industry. However, the examples highlighted by Stutz are not comparable to Nevada. Sure, the State of Michigan runs a lottery and has a single casino in Detroit. However, businesses in Nevada operate hundreds of nonrestricted gaming licenses and thousands more restricted gaming licenses, all of which would experience lower consumer demand in the event of a state-run lottery.

There is no legitimate policy argument to justify the imposition of state-run lottery anywhere, but especially in Nevada. A “business” columnist should know this.

(Geoffrey Lawrence is a fiscal policy analyst at the Nevada Policy Research Institute. For more visit http://npri.org)