American’s spent more than $80 billion on lotteries this year, which makes it the nation’s most popular form of gambling. The odds of winning are pretty bad, but the big prizes lure people in with a sliver of hope that it will be their one last chance to get rich. When they do win, they usually pay a lot of taxes, which can easily wipe out the jackpot. Moreover, the money doesn’t usually last very long. Many of the winners go bankrupt within a few years.
Almost every state has a lottery. It has a broad appeal as a way to raise funds, and state officials are eager to expand its games and prize amounts. But lotteries are classic examples of public policy decisions made piecemeal and incrementally, and with little overall perspective. Lotteries grow by accretion and cater to specific constituencies, such as convenience store owners (who often serve as lottery vendors); suppliers (heavy contributors to state political campaigns are frequently reported); teachers (when lotteries are earmarked for education), and so on.
The primary argument in favor of state lotteries has been that they offer states a source of “painless” revenue — that is, gamblers voluntarily spend their money, so the public gets more services without having to increase general taxes. But this narrative is skewed by the fact that most state lotteries are dominated by scratch-off games, which tend to attract low-income participants in disproportionately large numbers.