The Lottery – A Tax on Stupidity?


The casting of lots to determine fates and to distribute material goods has a long record in human history, including several instances in the Bible. The modern lottery, however, is a much more recent development. It began in the United States in 1776 when Benjamin Franklin sponsored an effort to raise money for cannons to defend Philadelphia against the British. The lottery grew from there and now accounts for some 5% of all state tax revenue. It is a massive industry and the source of much controversy.

The basic idea is that you pay a dollar, choose a group of numbers (or have machines randomly spit out numbers), and win prizes if enough of your chosen numbers match those randomly spit out by the machine. People do all sorts of irrational things to try and beat the odds, like buying a lot of tickets at one time, or choosing only certain stores to buy from, or picking lucky numbers. There is some science to picking numbers, although that science is largely based on statistical analysis of previous drawings. Generally, experts recommend covering as many groups of numbers as possible and staying away from number clusters (such as numbers that end in the same digit).

Lotteries are a controversial topic because they are often seen as a kind of “tax on stupidity” or even as an outright tax on poor people. In fact, a more accurate picture is that lottery spending correlates with economic fluctuations and tends to increase as incomes decline and unemployment rises. In addition, the advertising of lottery products is disproportionately concentrated in low-income neighborhoods.

Despite these realities, the political and economic power of the lottery has persisted. Today, nearly 30 states offer lotteries, which raise billions of dollars each year for state governments. Those governments then use the funds to help run schools, hospitals, social safety nets, and infrastructure.

In the nineteen-sixties, as America’s prosperity waned due to soaring inflation and the cost of the Vietnam War, the state’s ability to fund these services became more difficult. Some legislators turned to the lottery in an attempt to avoid raising taxes or cutting state programs.

Lottery supporters argue that winning a prize is not the same as gambling, and thus it should be treated differently. The problem with that argument is that it overlooks the fact that the lottery is very popular among those who would not normally gamble and therefore tends to obscure how big a risk they are taking. It also ignores the regressive nature of the lottery, which has been well documented by studies examining who plays and how often. The bottom line is that the lottery is a highly regressive form of taxation. It is not an ideal source of revenue for the state, and it should be eliminated. For more on this topic, check out the full article on NerdWallet.