Taxing the Poor

On Christmas Day 2002, Jack Whittaker won the lottery. He won big. At $315 million, he held the largest single winning ticket in the history of American lotteries.

Where did all that money come from? It came disproportionately from people on the bottom end of the income ladder – people who might otherwise have paid the rent, clothed their children or put food on the table for their families. (Whittaker, by the way, is an exception to the general rule; he was already worth $1 million before he bought his lucky ticket.)

As a result, that fateful Christmas Day will be remembered for achieving yet another milestone: An act of government that created more inequality per dollar spent in the shortest amount of time in all of human history.

Not everyone cares about inequality, but there are certain people known to be obsessed by it. So what, you may ask, did the New York Times editorial page have to say about this travesty? Not a word. Ditto for the Washington Post. What about Paul Krugman? Zippo. Bob Herbert? Nada. John Edwards? Zilch. What about all the other Democratic presidential candidates? Not a peep.

As Bob Dole might say, "Where's the outrage?"

Low income lottery players not only propelled Jack Whittaker into the ranks of the super-rich, they also helped pay for government services in states that participate in Powerball. Because these states create a lottery monopoly and outlaw all competitors, they are able to rake off a third or more of the money for themselves – compared to the four or five percent the house takes in Las Vegas or Atlantic City.

So what does all this have to do with health care? A lot, it turns out. Health care is government's fastest growing expenditure and the favored way of raising revenue these days is…you guessed it…taxing the poor. Through lotteries, taxes on tobacco and alcohol and a host of other excise taxes, politicians have shown unmatched creativity in finding newer, cleverer ways to squeeze more money out of people who have the temerity to be poor.

At the federal level, the newest idea is to tax poor cigarette smokers in order to provide health insurance to the children of the middle class. I wish I could report that congressional liberals will be in opposition; but, hey, it's their idea!

The National Center for Policy Analysis has released a task force report – drawing on all current academic research – on ways that government punishes people who have less than the rest of us.

Moral of the story: Go and be poor no more.

For the Task Force Report, "Taxing the Poor," see

Comments (6)

Trackback URL | Comments RSS Feed

  1. Amy Ridenour says:

    Excellent post.

  2. University Update - John Edwards - Taxing the Poor says:

    […] Wesley Clark Link to Article john edwards Taxing the Poor » Posted at The John Goodman Health Blog on Monday, July 09, 2007 Taxing the Poor On Christmas Day 2002, Jack Whittaker won the lottery. He won big … for the Washington Post. What about Paul Krugman? Zippo. Bob Herbert? Nada. John Edwards? Zilch View Entire Article » […]

  3. Pat King says:

    A very good point, although I think the current debate about expanding SCHIP is more complex than that. It is very true that some clever folks will figure out that covering their kids under the SCHIP program costs less than covering them under other options available to them. Just another example of the perverse incentives that reign in the health care sector.

    Another example is the outcry over hospitals billing the uninsured for more than what they collect from insurance companies. In response to the lawsuits about this, many hospitals have created automatic discounts for the uninsured – but have worried that if this continues, why would anyone buy insurance?

  4. Dr. Bob says:

    VERY INTERESTING and insightful. We were away last week and a cigarette vending machine was selling cigarettes at $6/pack in a restaurant.

    Is there a solution that will keep the poor from buying lottery tickets and from smoking? What has happened to the American dream that says if you work hard you can better your position in life?

  5. Camille Miller says:

    Provocative as always!

  6. Roger Beauchamp says:

    Here is another way we do not treat those who have less fairly in health care policy. Those dollars that are earned by employees and allocated to health care benefit programs escape the payroll tax as well as the income tax. This means that citizens, working in corporate America, with the best paying jobs and thus the best ability to provide for their basic needs escape all taxes on money dedicated to this need. All others start paying the payroll tax with the first dollar earned. If we want to promote personal responsibility, why not return the payroll tax for low income people that they are paying up to an established cap. Have the employer direct deposit it into a Health Financing Account under their name and social security number. The spending from this account would be limited to IRS qualified medical expenses and insurance premium payment. The employee can then voluntarily decide how much, up to the cap, they wish to exclude from income tax. I hope Devon Herrick shared our discussion with you. If we fail to get a much higher percentage of health care dollars under the primary control of our citizens,forcing fee and cost transparency, costs will continue to rise at an unacceptable rate reinforcing the single payer goal.