State Budgets and the Lottery

The lottery is a popular form of gambling that awards prizes to players based on a random drawing of numbers. People spend about 80 billion on tickets each year in the US. But what does this mean for state budgets? And what is the underlying message that lotteries are promoting to Americans?

There is a certain inextricable human impulse that drives people to gamble. And to an extent, this is what state governments are counting on with those big-splash lottery jackpots emblazoned on billboards along the highway. They are trying to lure in folks with the promise of instant riches, and then they are hoping that those folks will be smart enough to manage their newfound wealth, pay off debts, save for retirement and build emergency funds.

In other words, the lottery is a painless way to tax the middle and lower classes. That arrangement was fairly common in the immediate post-World War II period, but as incomes rose and the ability of states to provide services without imposing onerous taxes on their citizens diminished, that arrangement began to unravel.

And now, many state governments rely on the lottery as a significant portion of their revenue sources, and it is no longer clear that this arrangement will be sustainable. It is also clear that the messages being conveyed by state-run lotteries are skewing the public’s perception of the games. The games are often promoted as fun, which obscures their regressiveness and the massive amount of money being spent on tickets.