The Hidden Costs of the Lottery

Lottery is a fixture of our American lives, but its costs merit scrutiny. Americans spend over $100 billion on tickets every year, but what are they really getting for their money? Lottery profits go to states, which in turn use them for a wide variety of purposes. Most of these are noble; the lottery helped fund the building of Princeton and Columbia Universities, for example, and it financed roads, canals, and bridges in colonial America. However, some of the proceeds are regressive: Lotteries are popular in poor communities, and winning a jackpot often comes with a big tax bill that can wipe out a family’s savings or leave them deeply in debt.

The practice of distributing property or goods by chance has ancient roots, and the word “lottery” likely derives from a Dutch verb meaning to cast lots. In the 15th century, towns in the Low Countries held public lotteries to raise money for town fortifications and for poor relief. They became so popular that by the 1740s they were used to finance roads, churches, libraries, canals, colleges, and a whole range of public works projects. They were also used to raise funds for local militias and, in the 1750s, the British colonies raised money by lottery to finance their French and Indian War military campaigns.

Cohen’s focus is on the modern incarnation of the lottery, which began in the nineteen-sixties when growing awareness of the money to be made in gambling collided with a crisis in state funding. After World War II, states had expanded their array of services and could afford to do so without raising taxes on the middle class or working classes, but as inflation and health-care costs rose, and as the Vietnam War cost America billions, this arrangement began to break down.

At this point, state lotteries were a great way to generate revenue with very little political risk. They were also easy to promote and advertise, so politicians of all stripes began promoting them, and the notion that a ticket bought at a gas station was not only a fun way to waste money but a “tax on greed” became part of our national culture.

When lottery revenue began to plummet in the late 1970s, however, it became clear that the states could no longer subsidize a wide range of public services with its proceeds. The only options were to increase taxes or cut services, and both were extremely unpopular with voters. It was at this juncture that advocates of legalized gambling began to shift the way they sold it. Instead of arguing that a lottery would float a state budget, they now claimed it could cover one line item, usually education or veterans’ services but sometimes elder care or public parks. This new approach allowed them to argue that a vote for the lottery was not a vote for gambling, but for a service that most people needed. It was a persuasive narrative.