The Lottery and the Politics of Taxation


The casting of lots for decisions and destinies has a long history. But the lottery is not only a game of chance but also a major form of government revenue, generating millions of dollars in state coffers each year and drawing the attention of politicians looking for a quick source of painless taxes. Its success depends on the ability to enlist large numbers of people who will spend their money on a ticket in the hope of winning. This strategy raises a number of questions: Does it lead to irrational gambling behavior among the poor and problem gamblers; does it promote excessive spending in general; is it appropriate for states, given that they are taxing their own populations anyway?

The state lottery is a complex enterprise that has many stakeholders. It is a monopoly operated by the government (unlike commercial casinos, which are licensed to operate in return for a percentage of profits); it involves a high cost of marketing; it draws on the expertise of a large number of employees; and its operations are constantly evolving, with the introduction of new games to keep interest alive.

It is no wonder that the lottery has generated a wide variety of opinions on its merits and the role of government in the distribution of wealth. The lottery’s proponents argue that it offers a painless source of tax revenues; critics charge that its advertising is often misleading and frequently presents odds of winning as higher than they are, inflates the value of jackpots by spreading them over 20 years, thereby reducing their actual current value, and generally engages in other forms of deceptive marketing.