The Lottery and Its Impact on State Budgets

Nov 17, 2023 Gambling


As a form of gambling, lottery has a long history. But when it came to state funding, the modern lottery emerged in the nineteen-sixties, at a time of shrinking prosperity that made it increasingly difficult to balance state budgets without either raising taxes or cutting services.

Lottery revenues, it was hoped, could help. But what those revenues actually do is make the government richer and encourage more people to play, which reduces their disposable incomes by forcing them to divert funds that would otherwise go toward savings or investing in retirement or education. Lottery players as a group spend more than one per cent of their annual income on tickets—that’s thousands of dollars that could be invested elsewhere, and it’s not just poor people who spend money on tickets. Rich people do too. In fact, the wealthy buy fewer tickets but their purchases still add up to billions in forgone state revenue.

The prize money for a lottery drawing is usually set as a fixed percentage of ticket sales minus expenses for promotion and tax. In the past, some lotteries guaranteed that each ticket holder would win a certain amount. But in the modern era, that has largely stopped being the case. Regardless of the size of the prize pool, winning a lottery is still based on chance. Even picking the “right” six numbers, in a drawing such as Pick Three/Four or Powerball, is based on chance—it’s just that the odds of choosing those specific numbers are not any higher than any other set of numbers.

What’s more, lottery advertising and marketing campaigns are designed to keep people playing—the big jackpots are a big draw—and they rely on the psychology of addiction. The games are a form of gambling, but they’re sold as a harmless form of entertainment—a way to have fun. The truth is that it’s not fun, and it’s not harmless.

Cohen’s book offers an important perspective on this issue. He argues that the lottery’s success in the nineteenth century, which was made possible by a growing awareness of all the money to be had in gambling, was not due to a desire for public service; it stemmed instead from state finance problems caused by population growth, inflation and rising costs. As a result, the lottery became an important part of America’s social safety net.

But as the nineteen-eighties rolled around and the economy slowed, public support for the lottery waned. Despite the aversion to taxes that characterizes much of American politics, many voters saw no reason to pay more for the same old thing. Nevertheless, the lottery continues to operate in almost every state, with the same core message: We’re doing this for you. We’re helping your children. We’re helping your state. Just buy a ticket and see if you win! This article was originally published in the April 29, 2020 issue of The New York Times Magazine. It is republished here with permission. Copyright 2020 The New York Times Company.

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