The Regressive Effect of the Lottery

The lottery is a game where players purchase tickets in exchange for the chance to win prizes based on a random drawing of numbers or other symbols. While state lotteries do raise money for a variety of purposes and some winners do benefit tremendously from their winnings, the game overall has a regressive impact: it is more expensive for lower-income people to play than for those with greater means, and the odds of winning are much worse than those for most other forms of gambling. This regressive effect is especially important given that the lottery is often promoted to lower-income people as a way to help them escape poverty and achieve the American dream.

State lotteries typically follow remarkably similar patterns: they are established by statute with a monopoly for the sale and distribution of lottery tickets; they create a government agency or public corporation to run the lottery (as opposed to licensing private firms in return for a share of the profits); they begin operations with a modest number of relatively simple games; and, driven by constant pressure to maintain and grow revenues, progressively introduce new games. The result is a lottery system that is constantly changing, in which the public’s interest is rarely, if ever, taken into consideration.

Lotteries can be fun, even thrilling, and there is certainly an inextricable human urge to gamble. But when it comes to real money, a lottery habit can quickly erode the purchasing power of an entire household. Even a modest $20 per month lottery habit, which seems innocuous enough, can drain your entertainment budget and take money you might have put toward savings or paying down debt. And if you’re someone who’s been playing the lottery for years, it can amount to a small fortune.

The principal argument used in favor of lotteries is that they provide a source of “painless” revenue—that is, the money raised from ticket sales is a voluntarily spent form of taxation. It’s a message that resonates with voters, particularly when the state is facing financial stress and is considering tax increases or cuts to public services. But studies have shown that the subjective fiscal condition of a state does not seem to have any bearing on whether or when it adopts a lottery.