The Lottery and the Tax Revolt


In the early nineteen-sixties, as the economic boom of the postwar years faded and state governments struggled to balance their budgets, lottery proponents promoted a fantasy that it would fill public coffers without raising taxes. The first legal lotteries proved to be a bust, however; proceeds averaged less than two per cent of total state revenue. Moreover, many states, especially those with generous social safety nets, were already struggling to keep services on their rickety financial foundations, and balancing the books required either raising taxes or cutting costs, both options that enraged voters.

As Cohen explains, lottery advocates began to argue that people were going to gamble anyway, so the state might as well profit from their habit and thereby keep tax dollars in the pockets of average citizens. This argument provided moral cover for state officials, who approved lotteries even though they knew it primarily benefited wealthier whites. This was part of the nation’s “tax revolt,” a period in which many voters favored low taxes and decried high spending on social services.

But lottery profits did not boost overall government coffers, and as the economy grew, deficits ballooned. In the late nineteen-seventies, rising inflation and the cost of the Vietnam War made it impossible for many states to raise enough money through taxes or other means. The solution was to turn to the lottery, which was cheaper and easier than raising rates or cutting services.

Lottery prizes are based on chance. The prize money for a given lottery is usually a pool of funds that is the remainder after all expenses (profits for the promoter, promotional costs, and taxes or other revenues) have been deducted from it. The amount of prize money depends on how much people buy tickets.

Whether the outcome of a lottery is determined by chance or by skill, it is a game that has a finite number of possible outcomes. When the odds of winning are low, many people will continue to play, but when the odds become much higher, fewer people will. The lottery thus has the potential to be a form of addiction.

Unlike other forms of gambling, the lottery is a regulated business. In the United States, the minimum age for lottery players is 18; some states also have minimum wage and other restrictions that apply to workers who purchase tickets. In addition, the lottery’s regressive nature has led to concerns about its impact on lower-income individuals. According to the consumer finance company Bankrate, people making more than fifty thousand dollars a year spend one per cent of their income on tickets; those earning less than thirty thousand spend thirteen per cent. This is the sort of data that lottery commissioners are looking at when they design their promotions, ensuring that the odds of winning remain as low as possible. This is a good thing in principle, but it obscures the regressivity of the lottery and hides its addictive power. The lottery has become a powerful force in American life, and it should be treated with caution and respect.