Taxing the Lottery


A lottery is a form of gambling wherein people pay a small amount of money to be selected in a random draw. The winners are rewarded with a prize. Lotteries are legal in most states and are a common source of revenue for governments. In the United States, there are many different kinds of lotteries. Some are instant win scratch-off games, while others involve picking a group of numbers or having machines randomly spit out tickets. Some of them also offer multiple ways to win, including a jackpot or other special prizes.

Governments promote the lottery as a painless form of taxation, but its regressive nature obscures how much of a trade-off it is for the people who play it. Lottery revenues represent a small fraction of state budgets, but they are still significant enough to cause people to trade away more productive uses of their time and resources.

Most people who play the lottery do so because they like to gamble. But there are other factors that come into play as well. The irrational lure of instant riches in an era of inequality and limited social mobility is one such factor. Lottery marketers understand this, and they use billboards to target those who might be tempted by the big jackpots advertised.

In addition, the chance of winning the lottery is exaggerated in marketing materials to attract more players. But the odds of hitting it big are actually quite low. Moreover, there are other sources of gambling-related entertainment, such as sports and horse races. These are not as lucrative for the average person, but they are not nearly as regressive.

The question is whether or not we should be in the business of promoting vices like gambling in order to raise tax revenues. After all, government taxes on alcohol and tobacco are designed to discourage those vices, and the regressive effects of gambling are nowhere near as pronounced as those of cigarettes or booze.

Lottery advertising campaigns often portray gamblers as irrational, but this is unfair. Most people who spend $50 or $100 a week on tickets are committed gamblers. They know the odds are terrible, but they continue to play because of the entertainment value and the hope that they will eventually win. Despite these odds, Americans spend more than $80 billion on the lottery every year. This is money that could be used for other purposes, such as saving for an emergency or paying off credit card debt. Instead, it is being spent on a chance of getting rich quick. It may be irrational, but it’s not stupid. This article originally appeared in the New York Times. Reprinted with permission from the author. Read more of the author’s articles at The Times. Copyright 2022 New York Times Company LLC. All rights reserved. DISTRIBUTION PERMITTED AS LONG AS ALL COPYRIGHT AND OTHER NOTICES ARE KEEPED FULLY IN TIME. Reproduction in whole or in part without written permission from The New York Times is prohibited.