As Mississippi lawmakers look into legalized sports betting to raise much-needed funds, a charitable trust has warned that such “sin taxes” are not a universal panacea.
In the state, sports betting was recently legalized and lawmakers are hoping to use the new industry as well as the creation of a lottery to generate around $200m (￡15.3m) annually to finance highway and bridge improvements. If a funding plan can be agreed upon between leaders of the Senate and the House, Governor Phil Bryant could call a special session in August to discuss the options.
The governor has suggested that taxes from online sales, sports betting, and a lottery could create the funds needed for the projects. However, conservative groups do not want to see any new gaming enter the state. The Pew Charitable Trust, a nonprofit group, recently released findings from a study they conducted, examining what they are calling “sin taxes”, taxes that are generated from the sale of alcohol and tobacco as well as from gambling, including a lottery and sports betting.
Sin Taxes
According to the group, the taxes are a tempting source of revenues but are unreliable. The project director for state and local fiscal health of Pew, Mary Murphy, said: “Any of these new, or even existing, sin taxes are unlikely to be a silver bullet for larger budget issues—certainly, when attempting to resolve some of the larger structural budget challenges that many states are facing.”
Mississippi is one of just six states that does not have a lottery, including its neighbor Alabama. Conservatives of both states have stopped the progress of any legislation aimed at creating a lottery. In Mississippi, dockside casinos were made legal in August of 1992, and three months later in November, the prohibition of lottery gaming was removed from the state constitution.
However, legislation was never enacted by lawmakers to create a lottery, mainly due to religious groups. Philip Gunn is the Republican House Speaker, a leader of a Baptist church, who is opposed to the lottery. Reportedly, the governor feels that Gunn would allow the House to vote on the lottery if it were to come up in a special session to help with transportation funding.
Gunn created a study group for lottery gaming when the 2017 legislative session came to an end. The study reviewed how much money neighboring states were collecting after lottery prizes were awarded and expenses paid during the previous budget year. Of course, Alabama does not offer a lottery, but the study did include information from the neighboring states of Tennessee, Louisiana, and Arkansas.
According to the study, Arkansas earned $85.2m (￡65m) while Louisiana earned $177.9m (￡135.8m). The state of Tennessee surpassed them both with $395m?(￡301.5m) in earnings. Residents of Mississippi travel to nearby states to play the lottery, and according to Darrin Webb, Mississippi state economist, as much as $5m?(￡3.8m) to $10m (￡7.6m) is spent a year in Arkansas. In Louisiana, residents of MS are spending much more, at around $30m (￡23m).
On the horizon
While lottery gaming is seemingly far away in the state, sports betting has been legalized. Despite what Pew is calling ‘sin taxes’, once sports betting is launched in the state, the new industry will have a positive impact by generating much-needed funds.
It has been estimated that sports betting will produce just under $10m in annual state revenues with casinos that offer the option paying state and local taxes based on 12% of wagers after payouts have been subtracted.