The Cost of Raising Revenue From the Lottery


The lottery is a popular form of gambling where participants pay a small amount of money for the chance to win a big prize. While many people view this as an addictive form of gambling, there are also some benefits to the arrangement: It raises a lot of money for state projects and allows people to dream about what they could buy with millions of dollars.

In the United States, there are over 200 lotteries, and they raise a significant portion of state revenues. They are a popular source of revenue for public schools, health care and other state services. State officials promote lottery tickets as a great way to help the poor and working class, and they are often seen as a better alternative to raising taxes. However, a closer examination of the cost of the lottery shows that it is a very expensive way to raise funds for state purposes.

When states give a portion of lottery proceeds to their players, they have to reduce the size of the prizes in order to keep ticket sales robust. The lower the prizes, the less money is available for state uses, and the resulting percentage that goes to state revenue is not as transparent as a normal tax. Consumers generally aren’t aware of the implicit tax rate on their ticket purchases, so they don’t question whether it is worth paying to participate in the lottery.

Traditionally, lotteries have been a means for the government to raise money for state and charitable purposes. In the early post-World War II period, states saw them as a way to expand their social safety nets without imposing especially onerous taxes on the middle and lower classes. This was an era of rising inflation and higher living costs, so the lottery was seen as a “painless tax.”

The first lotteries that awarded money prizes appear in records from 15th-century Burgundy and Flanders with towns raising funds for walls and town fortifications, or to help the poor. They may have been inspired by a custom among wealthy dinner guests of the apophoreta, in which food and drink was distributed at Saturnalian feasts, and prizes were awarded by chance during the course of the evening.

Lotteries became a common practice in colonial America, where they raised funds for roads, canals, churches, colleges, libraries and other public works. They helped finance the construction of Princeton and Columbia Universities, as well as many colonial militias during the French and Indian Wars.

While it is true that many people are willing to take a chance on the lottery, there are some who should not be allowed to play. In addition to the obvious dangers of addiction, there are several ways that lottery playing can hurt people and their families. These include the following: