Private-sector monopoly?!

Free Market

| February 7, 2011

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

Geoffrey Lawrence is director of research at Nevada Policy. Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission. Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association. From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society. Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics. He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation. Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke. He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.