Raising Revenues Through the Lottery

Choosing numbers by drawing lots has a long history (there are several instances in the Bible) but lotteries to give away money or other valuables have only recently emerged as a popular means of raising state revenues. The underlying logic is simple: the lottery attracts people who wouldn’t normally gamble and thus provides an easy way to raise a significant amount of cash. As a result, it is a very popular form of gambling.

As states expand their social safety nets in the post-World War II period, lottery revenues became a welcome source of extra revenue without the need to increase taxes on middle and working class families. Unfortunately, this arrangement soon began to break down. By the 1960s, inflation had eaten away at the value of prize winnings, and many states faced a difficult choice: cut services or start selling tickets to boost revenues.

The solution that most states chose was to expand the lottery. Although the majority of states now conduct lotteries, few have a coherent public policy on the matter. Instead, they make decisions piecemeal and incrementally, with little attention to the overall effect of lottery operations on their residents.

Lotteries should be seen as a form of gambling, and the same ethical issues that apply to other forms of gambling must be taken into account. The promotion of the lottery, particularly through its advertising, can lead to problems with compulsive gamblers and a regressive impact on lower-income communities. Moreover, the state’s dependence on lottery revenues can run at cross-purposes with its wider responsibilities.