Lottery Revenues Aren’t Helping State Budgets
The casting of lots for decisions and fates has a long record in human history, but lotteries that are run for money are more recent. They became popular when states took control of the games, allowing them to sell tickets and award prizes to nonprofit groups that they authorized. Today, 44 states and the District of Columbia operate lotteries.
When lottery officials tout the benefits of the games, they usually highlight the fact that all proceeds go to public good—education, social programs, and so forth. This argument has proved effective. Lottery proponents have been able to convince voters that the games are an alternative to raising taxes or cutting public services. But a glance at the data suggests that, on balance, lottery revenues have done little to help state finances.
As with all commercial products, lottery sales spike when times are bad. In a typical recession, the percentage of adults who play the lottery doubles and triples. But what’s really happening, as sociologist Joshua Cohen points out in his book The Lottery, is that people are substituting gambling for other forms of spending. The dollars flowing into state coffers may be less than those spent on food, housing, and health care, but they are still a significant addition to household income.
Moreover, because lottery sales increase as unemployment and poverty rates rise, the games are more heavily promoted in neighborhoods that are disproportionately poor, black, or Latino. The result is that state lottery profits skew toward the bottom half of the income distribution.
This isn’t to say that lottery officials don’t try to address these concerns. The savvy ones know that “a lottery isn’t just about avoiding the moral hazards of gambling, but also about winning.” They use a range of tactics to lure players: aggressive advertising campaigns; big jackpots that earn free publicity on newscasts and web sites; and gaudy tickets that resemble nightclub fliers spliced with Monster Energy drinks.
It’s all designed to keep players coming back for more. It’s not so different from what tobacco companies and video-game manufacturers do to keep their products on the shelves.
But there are other ways to raise revenue. A handful of states, including Alabama and Utah, don’t run lotteries. The others—including Mississippi, Nevada, and Arizona—don’t run them because they already get a cut from legal gambling, or because they don’t see the same fiscal urgency that motivates other states to adopt the games. But for the rest, the question remains: Why?