Lottery Taxes

The casting of lots for decisions and fates has a long history in human culture, as evidenced by the numerous instances of it in the Bible. But lotteries as public events that award prize money have a rather more recent pedigree. Their use as a means of raising revenue for everything from street repairs in Rome to paying the ransom for enslaved people has become an increasingly common phenomenon, both in Europe and America.

Almost every state operates one. The basic pattern is the same: a government establishes a monopoly for itself; establishes a public agency to run it; begins operations with a modest number of relatively simple games; and, under continuous pressure to generate additional revenues, progressively expands the lottery. The expansions take a variety of forms, from increasing the size and frequency of the drawing to adding new games.

In their promotional campaigns, the states that run lotteries promote their products as a painless form of taxation. In fact, in the immediate post-World War II period, state governments could afford to expand a large range of services with lotteries and other relatively painless taxes on the wealthy.

Lotteries rely on the public’s perception that their product is morally neutral, a civic duty to help support state programs. That is probably why they do not disclose the percentage of state revenue that they raise. They also do not disclose that the majority of players and the bulk of their revenue come from middle-income neighborhoods, with disproportionately fewer from low-income communities.