There’s something strange about the lottery: People pay money to play it, and in many cases they do not win. The prize money can be huge, but so are the odds against winning. The fact that most players know these odds and still buy tickets is a testament to our deep desire for hope. But that hope can be misplaced. It’s a lot like believing you’ll win the Powerball.
In the United States, where we spend about $100 billion on lottery tickets a year, state officials promote lotteries as a way to raise revenue without especially onerous taxes on poor and working-class families. It’s a savvy strategy, but it’s based on an unrealistic assumption: that lottery proceeds will help keep state governments running efficiently.
The truth is that, over time, lottery revenues have been squandered. In the years leading up to the Great Recession, states cut education spending, slashed public-health and welfare programs, and cut back on the amount of money they spent on things like road repairs, police salaries, and school-bus drivers. This meant that they had less to spend on lotteries and other things that they used to do well, but now they have to make up for.
While some of this lost revenue can be made up through cuts to other services, there is only so much that can be done. In order to keep providing the same level of service, states must make up the difference with higher property, sales, and income taxes — which hit poorer people hardest. Fortunately, there are other ways to raise money.
In recent decades, some states have begun to use a lottery-like system to distribute scholarships and grants to poor students. It is a more equitable way to award funding than simply giving it to the wealthiest applicants who can afford the highest application fees. But it’s also a questionable way to allocate public resources, especially in a time of limited resources and strained local budgets.
A lottery is an arrangement in which prizes are allocated by a process that relies solely on chance. The prizes can be cash or goods. In some arrangements, the prize money is a fixed percentage of ticket sales. In others, the participants choose their own numbers or have machines randomly select them. In most countries, winners are given the choice of receiving a lump sum or annuity payment, and this decision can have significant consequences.
In the United States, a lottery winner who chooses to receive a lump-sum payment will likely end up with considerably less than advertised, because of income tax withholdings. The same is true for other countries that have lottery-style schemes. Nevertheless, the lottery is a popular form of gambling and it has been around for centuries. Whether or not it is good for the economy and society remains to be seen. In the meantime, it’s an arrangement that should be carefully monitored by lawmakers and by the citizens it serves.
