Although the odds of winning the lottery are incredibly low, Americans still spend over $80 Billion on tickets every year. That’s a lot of money that could be used to build an emergency fund, pay off credit card debt or even invest in stocks and bonds. However, most people lose that money because they don’t know how to play the game correctly. Here are a few things to keep in mind before you buy your next lottery ticket.
1. Lotteries are regressive.
In an era of widening economic inequality and newfound materialism claiming that anyone can become rich, state lotteries play on the hopes and dreams of many consumers. They also appeal to popular anti-tax movements that have led states to search for alternatives to taxing incomes. As a result, lottery revenues have increased significantly in recent decades and governments rely on them for revenue.
2. Lotteries are a form of hidden tax.
The casting of lots to decide fates and fortunes has a long record in human history. But using it to generate funds for private and public projects is relatively new. In colonial America, for example, Benjamin Franklin ran a lottery to raise money for the militia and other public ventures. John Hancock ran a lottery to help finance Boston’s Faneuil Hall, and George Washington ran one to raise money for building a road across Virginia’s mountain pass. In addition, a number of private and public institutions were financed with lottery proceeds, including roads, libraries, churches, canals, bridges, colleges, and even universities.
3. Lotteries are promoted by government officials.
In many states, lottery advertising is backed by government officials, who make the case that lotteries are a painless alternative to raising taxes. This argument is especially effective in times of fiscal stress, when it can help cushion the blow of possible tax increases or cuts in public services. However, studies show that lottery popularity is not tied to a state’s actual fiscal health. As Clotfelter and Cook explain, “The objective fiscal circumstances of a state appear to have little influence on lottery popularity.”
Furthermore, because lotteries are run as businesses with the goal of maximizing profits, they must spend money on marketing to persuade customers to spend their money on their products. This marketing is at cross-purposes with the general public interest, and it raises questions about whether government at any level should be in the business of promoting gambling. Ultimately, this is just another way that our government gets in bed with big business and takes on a lot of unnecessary risk. This is a problem we need to address at all levels. Because, as we’ll see, it can have serious repercussions. The neoliberal policies of the last decade have given states few tools to manage this risk. As a result, it’s all too easy for politicians to succumb to the pressure to increase lottery revenues. And once that happens, it’s all too hard to unwind the spiral of addiction and regressivity that follows.