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U Expert Says Lotteries Could Replace Numbers Racket

U Expert Says Lotteries Could Replace Numbers Racket image
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If state lotteries were designed so bettors could enter and win in a pattern parallel to operations of the numbers racket, the illegal games could be driven out of business. Prof. J. Ross Wilhelm, a business esconomist in the University's School of Business Administration, has offered that suggestion in his program, "Business Review," j produced by the U-M Broadcasting Service (WUOM). j "The numbers racket," Wilhelm notes, "allows the bettor I to select the number he bets on rather than simply buying a pre-numbered ticket, and allows the bettor to bet any amount. The numbers also has daily drawings and sells its j bets in a large variety of outlets. To run the numbers out of business, the state lotteries must duplícate these characteristics and also provide bigger winnings." State lottery commissions, he urges, should add a new variety of lottery designed for areas where the numbers raclet is flourishing . . . duplicating the services offered by the illegal numbers and providing a much higher payoff than the numbers racket can match. The easiest way for the state to secure the necessary organization, Wilhelm says, would be simply to hire the present people . . . the runners, clerks, stores, and others . . . who now work for the Mafia-run numbers rackets. "Such a move would insure this ghetto industry would keep on providing jobs in these areas," he points out, "and it would also deprive the mob of of its wage earners." This possibility of simply legalizing the existing numbers game would not have the effect of drivingorganized crime out of the gambling business, Wilhelm states. He predicts that if the numbers were legalized, the Mafia would simply set up publicly acceptable front men to hold the licenses or franchises for them and bribe public officials to insure that their front men received franchises or licenses. "The Mafia would soon have the same kind of monopoly of of the legalized numbers they now hold in the illegal rackets. In addition, corrupt public j ficials also would overlook I manipulation of winning I bers to reduce the payoffs." In contrast, he says, games I run directly by state I ment "can easily be I lished so they cannot be I rupted and can be audited by I outsiders." i The Nixon administration I could make a major I tion toward elimination of I legal gambling as an income I source for organized crime, Wilhelm says, by allowing direct deductions of bets where states establish new forms of the lottery which duplícate exactly the operations of illegal numbers games. Federal income tax regulations now prdvide that monies won in gambling are nontaxable only to the extent that the winnings are offset by prior losses. Bets made by gamblers are tax deductible only to 'the extent they offset winnings. "Since various state governments are now using lotteries as a source of revenue, it i? obvious that by every definition bets made on the state lotteries are tax payments by those betting. State taxes paid are a deduction from the federal income tax at the present, and the bets made by taxpayers on such state lotterie-3 probably will have to be M- treated as tax deductions under the present federal income tax." An obvious further step, Wilhelm adds, would be to allow winnings from state lotteries and other state-operated gambling games to be tax-free provided the states are using their gambling games as effectiv.e competition for illegal gambling. Experience in New Jersey shows clearly that daily draw - - - - -- ings of the conventional lottery do not offer effective tion for the numbers, Wilhelm adds. i "Before any state lottery becomes eligible for federal tax advantages it must provide games that will run the illegal gamblers out of business. Otherwise, the federal government will be simply encouraging gambling with no offsetting social benefits "