| Lottery tax plan could threaten game AIKEN - When politicians and pro-gambling hawks first started hustling state-run lotteries in the 1980s and 1990s, they spun two myths around the widespread games of chance that have been stubbornly hard to shake. Myth One: Lotteries are a painless substitute for a tax increase and provide an alternative stream of revenue from players who voluntarily buy tickets. Unlike levies on purchases, income or property, money isn't coerced from residents with the threat of prison time or hefty fines. Myth Two: Lotteries are a mighty pillar of support for public education, pumping money into computer purchases, scholarships and other programs schools wouldn't otherwise be able to afford. With his proposal to eliminate the 5-cent sales tax exemption on tickets sold by South Carolina's lottery, Republican Gov. Mark Sanford is going against the grain of both myths and risking damage to the lottery in its second year, gambling experts said. "First of all, a lottery is already a tax," said William Thompson, a professor of public administration at the University of Nevada-Las Vegas, one of the nation's leading gambling authorities. "The player is already paying a sales tax every time he buys a ticket. ... If the state wants more money, just lower the amount paid out in prizes and keep the myth alive." Nationwide, about 67 percent of the money brought in by lottery sales winds up in state coffers, Mr. Thompson said. In effect, this is a hidden 67 percent sales tax on every ticket. The other myth is harder to pierce. In Georgia, Texas, Florida and South Carolina, lotteries were sold as new sources of revenue for education, an effective counter to the opposition from churches and anti-gambling activists. The centerpiece of Georgia's lottery - championed by former Gov. Zell Miller - is the HOPE Scholarship, a popular college program echoed by South Carolina's LIFE, HOPE and Palmetto Fellows scholarships. The aura created by these scholarships obscures two facts that counter the myth. First, the education money from lotteries is dwarfed by the cost of education in almost every state. In South Carolina, the education budget for public schools is about $3 billion, almost half of the state's annual spending blueprint, said state Rep. Roland Smith, R-Langley, the chairman of the K-12 subcommittee of the House Ways and Means Committee. Second, lottery money sent to higher education programs outstrips money pumped into public schools. This year, the lottery will contribute $215 million to public schools, college scholarships and endowments for state universities, according to South Carolina Department of Education figures. Of that amount, only $71 million goes to public schools - about 2 percent of what the state spends each year on grades K-12. The remaining $144 million is earmarked for higher education, from scholarships to the $30 million endowment split by the University of South Carolina, Clemson University and the Medical University of South Carolina. Mr. Smith, a retired preacher who voted against the lottery three years ago, says he would like to reverse the lottery ratio between public schools and higher education. However, the veteran legislator recognizes the value of lottery dollars in tough economic times that have resulted in huge budget cuts to public schools and almost every other state program and agency. "Without the lottery money we had to spend this year, education would have taken a tremendous hit beyond what they took this year," Mr. Smith said. Mr. Sanford, a lottery opponent, hopes to raise about $29 million by slapping the sales tax on lottery tickets, earmarking the money to help offset a 15 percent reduction in South Carolina's income tax. To raise the rest of the $193 million cost of the income tax reduction, the governor also wants to raise cigarette taxes from 7 percent to 68 percent. If passed by the Republican-controlled Legislature, South Carolina would become the only one of 40 lottery states and the District of Columbia to tax ticket sales, said Mr. Thompson and other lottery experts. The state would also run the risk of getting kicked out of the lucrative, 22-state Powerball game because the sales tax would boost ticket prices above the $1 maximum mandated by game organizers. Georgia participates in the Mega Millions multistate game, which also has a $1 limit on ticket prices. All of this makes Mr. Thompson wonder whether the governor is trying to sink the South Carolina lottery instead of soak it. "He's probably against gambling and figures he'll screw the players and the game," he said. "If you don't want a lottery, just kill it, don't do something like this." EDUCATION MONEY Lotteries are running in the District of Columbia and 40 states, including Georgia and South Carolina, where a portion of the take is devoted to higher education and public schools: GEORGIA: $2.6 billion in ticket sales last year; $751 million to education, or 29 percent SOUTH CAROLINA: $1.06 billion in ticket sales last year, $252 million to education, or 24 percent. Includes revenue from the first six months of the lottery, which started in January 2001. Sources: South Carolina and Georgia education departments and lotteries Reach Jim Nesbitt at (803) 648-1395 or jim.nesbitt@augustachronicle.com.
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