Policymakers should think carefully about the administrative costs of raising revenue through a state lottery. In effect, the state would be legalizing gambling, establishing a state monopoly on it, and then taxing gross sales at a 33 percent rate. The cost per dollar collected of this lottery tax would be 20 to 50 times greater than the cost of raising rates for other state taxes that already exist. The best course for the state is not to raise taxes at all but to reduce the size of government.
Education reform in North Carolina has a long history, but has shown mixed results at best. Despite recent improvements in some test scores, the state's public schools still deliver poor-quality services at excessive cost to large segments of the student population. Under the state's new ABC plan, nearly half of all public schools in 1996-97 failed to provide a year's worth of educational progress for a year's schooling. Only 26 percent of N.C. 4th-graders are proficient in reading and 21 percent are proficient in math.
As state leaders debate yet another proposal for a state lottery this year, they should consider the equity issues raised by using proceeds to fund college scholarships, as done in Georgia and proposed in previous N.C. bills. The family income of freshmen entering a UNC system school averaged $55,000 in 1997, while the median income of UNC-Chapel Hill freshmen was about $75,000.1 By comparison, if a North Carolina lottery follows Virginia's pattern of participation, the median household income of lottery players would be only $29,000.2
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