The Hidden Costs of Lottery Gambling

The lottery is the most popular form of gambling in America. States generate billions of dollars in lottery revenue each year. But the state has to pay out a respectable portion of that money as prize money, which leaves less money for other things the government needs to do, such as education. But what is the true cost of this state-sponsored gambling?

Lotteries are a long-established part of human culture, and the practice goes back centuries. The Old Testament instructed Moses to divide land by drawing lots, and the Romans used lotteries to give away property and slaves. They were introduced to the United States by British colonists, and the initial reaction was overwhelmingly negative. Many Christians argued that they defiled God’s law of “first fruits” and violated the biblical prohibition against gambling, and ten states banned them between 1844 and 1859.

But in modern times, lotteries have grown more and more popular, in part because they offer people the chance to win huge sums of money with very little risk. Billboards hawking lottery jackpots on the highway are hard to ignore, and countless television commercials offer the prospect of instant wealth. It’s no accident that these ads are so prevalent—the promise of a quick and easy windfall has become a potent social force, especially in an era when inequality is growing and the American dream of upward mobility seems increasingly out of reach for many working families.

While people of all socioeconomic levels play the lottery, poorer people buy more tickets. Richer people spend, on average, a far smaller percentage of their incomes on the games. But they are more likely to be sucked into the whirlwind of “lottery addiction” and lose a huge chunk of their paycheck, often without even realizing it.

To keep ticket sales strong, states have to pay out a large proportion of the proceeds as prizes. This reduces the percentage available for other uses, and most people aren’t aware of this implicit tax rate when they purchase their tickets.

In the nineteen-sixties, as America’s prosperity began to wane, a growing awareness of how much money was to be made in the gaming business collided with a crisis in state budgets. The result was a race to the bottom between raising taxes or cutting services, both of which were deeply unpopular with voters. Lotteries offered a solution that was politically feasible, and the lottery industry exploded. The glitz of instant riches lured millions. And for most, that ruined the game.