Americans spend over $80 billion on lottery tickets every year. That’s over $600 per household. That’s enough to build an emergency fund, pay off credit card debt or buy a new car. But where does all that money come from? And is the lottery really a good way to raise state revenues?
Lotteries are popular and lucrative public-sector revenue sources. They are easy to organize and operate, require little or no governmental oversight and control, and produce substantial cash flow from ticket sales. Lotteries are also widely viewed as painless taxation—players voluntarily spending their money for the benefit of the general public, rather than having to force them to do so through a conventional state tax.
The practice of making decisions and determining fates by the drawing of lots has a long history, with many examples in the Bible and in Roman legends about giving away property or slaves. The first publicly organized lotteries, in which prize money was awarded to players, appear in town records in the Low Countries during the 15th century for purposes such as raising funds for town fortifications and helping the poor.
The lottery industry’s promotion of gambling raises a number of ethical questions. Most critics argue that lottery advertising is deceptive, presenting unrealistic odds of winning the jackpot (in reality, lottery winners are more likely to hit smaller prizes such as instant tickets or scratch-off games) and inflating the value of a winning ticket (lotto winners typically receive their prize in annual installments over 20 years, with inflation and taxes dramatically eroding the amount paid out). In addition, many lottery ads target vulnerable populations, including the poor, problem gamblers and children.