Indeed, that happened in the state where I grew up. When they started the state lottery, it was with the promise that the money would be spent on "education." Sure enough, the lottery money went to the education fund, and the contribution from the general fund was reduced by the same amount.
I agree that fungibility is a hugely under-appreciated (or cynically de-emphasized) concept when it comes to funding governments via special taxes. (Great example.)
The concept also applies to non-profit donations more broadly, but only under the assumption that the size of the donation is small enough that it doesn't exceed the total amount that the non-profit would have spent on that cause anyway.
If you're donating a large amount that exceeds the current budget for your chosen cause, then your donation does make a difference -- but it's not quite as large as it seems. It might only be the difference between the previous spending level and the new level (after your donation and after some budget refactoring).
To use your example, if the state was spending $1B on on schools previously, then donating less than $1B doesn't necessarily make a difference to school funding -- they can just push money around. But if you donate $1.2B, then you have made a difference -- of $0.2B.
If you're donating to a small non-profit, though, then maybe it's easier to find targets in which you could dwarf the existing spending on your topic of choice. (Not to say that you should, though. I agree with Graham's argument.)
> contribution from the general fund was reduced by the same amount.
which sucks - but it points to a problem of under-specifying the "rules".
The original intend is to ensure that the proceeds of the lottery added to the education fund. But the wording of the rule only specified where the lottery money got spent, rather than specifying the desired outcome (that schools got $X more funding).
Almost every state I know of with a state lottery passed it under the proviso that the profits would fund “education”. Almost every state then proceeded to gut the education budget and replace it with lottery funds.
The lottery is a choice. No one is forcing anyone to play. People are going to gamble though, so the state might as well take a cut as a way to discourage it.
> The lottery is a choice. No one is forcing anyone to play.
That effectively makes it a tax on the innumerate.
People are going to gamble though, so the state might as well take a cut as a way to discourage it.
It's fairly well established that rather than discouraging gambling, the result of government endorsement and taxation is a net increase in gambling.
I think I've also seen some analysis that after about a decade, the increase in gambling behavior is also correlated with less taxable income from citizens, higher consumption of alcohol, etc., which amplifies the regressive effects.
The state doesn’t discourage it, they promote it. That’s the problem. Gambling is entertainment for people who don’t understand statistics. It’s a tax on the poor.
