Then you haven't been to a Cingular, Verizon, or Sprint store lately. Get yourself one of those "free" phones and see what value your state places on the sponsored acquisition of a "free" item. In California, the taxes for a free phone are pretty hefty.

I have no idea what financial machinations take place behind the scenes when a Marriott reward is redeemed, but it would make sense to me that someone would have to toss the state a few shekels.