Lottery Revenues and State Budgets


Lottery is a type of gambling in which numbers are drawn for prizes. It is a form of betting that involves a certain degree of luck and chance, which makes it more accessible than many other forms of gambling.

The casting of lots to determine fates or to distribute property has a long history, but the first lottery to award prize money for a specified purpose was organized in the 17th century for a variety of public usages. It was hailed as a painless form of taxation and a way to raise large sums in a short period of time. Today, the lottery is a ubiquitous presence in most states, and it is estimated to generate over $60 billion per year.

State governments typically set up a state-owned, monopoly operator; establish a pool of revenue from ticket sales; earmark some of the proceeds to a particular use, such as education; and progressively expand the number and types of games available to players. But the growth of the industry has been driven by a constant need for additional revenues, and there is little evidence that earmarked appropriations have been spent on their intended purposes. Moreover, it has been found that the popularity of the lottery is not related to the actual fiscal condition of state government. Lottery revenues have been very popular in times of economic stress, but they also have won broad support when the state’s finances are sound.

In the past, state governments tended to emphasize the social good of lottery revenue by stressing that it would be used to help the poor and working class. However, it is now known that the large majority of lottery players and dollars come from middle-income neighborhoods, and a disproportionately smaller percentage comes from low-income neighborhoods. The result is that the social welfare benefit of the lottery is minimal to nonexistent.

Rather than emphasizing the social welfare aspects of the lottery, most state advertising now focuses on two main messages: 1) that playing the lottery is fun, and 2) that the lottery is a great way to get rich quickly. These messages obscure the regressive nature of the lottery and reinforce the idea that anyone, no matter their income, can become wealthy by buying a ticket.

In an anti-tax era, many people see the lottery as a relatively easy way to support the government without raising taxes on their already-strained budgets. But there are serious questions about whether it is appropriate for government at any level to promote an activity from which it can profit, especially when that activity has negative consequences for the poor and problem gamblers. And it is also possible that the promotional efforts aimed at maximizing revenue are at cross-purposes with a government’s stated goal of promoting the general welfare. As the debate over this issue continues, the public should be informed of the true costs and benefits of the lottery. In doing so, it will be able to make an informed choice about its role in the modern economy and society.