Is the Lottery Worth the Cost to State Budgets?


The lottery is an enormous business in the United States. Americans spend upward of $100 billion per year on tickets, making it the most popular form of gambling in the country. States promote lotteries as a source of “painless” revenue: taxpayers voluntarily spend money that would otherwise be taxed, which they believe is being used for the public good. But just how meaningful this revenue stream is to state budgets and whether it’s worth the price of people losing their money deserves some scrutiny.

A number of economists have weighed in on this debate. One argument is that state governments need a reliable source of revenue that will grow over time, which the lottery might provide. But a more fundamental point is that if states run their lotteries like businesses, they will always be at cross-purposes with the general public interest. Those who run lotteries must constantly advertise their products to attract customers and maximize revenues, which may encourage them to market to the wrong groups.

Moreover, lotteries are regressive and tend to attract low-income players. According to a study conducted in the 1970s, for example, the majority of lottery participants came from middle-income neighborhoods while only a small proportion of participants came from high-income and lower-income areas. The results suggest that the poor are more likely to lose than the rich to the lottery, and the state’s promotion of gambling may not be in the best interests of the population as a whole.

Many states set up a government agency or public corporation to run their lotteries, rather than licensing a private firm in return for a cut of the profits. This arrangement gives the lottery a degree of independence from other state programs and ensures that it can be run in accordance with the laws of the state, but it also limits its options for increasing revenues. In the immediate post-World War II period, this arrangement worked well enough, as state agencies could expand their social safety nets without imposing especially onerous taxes on the middle class and working classes.

Aside from advertising, another key element in a lottery’s marketing is the selection of prizes and the structure of the prize pool. In most cases, a lottery offers a single top prize of a substantial amount, along with smaller prizes for more modest amounts. The size and value of these prizes are predetermined, and they usually include profits for the lottery’s promoter as well as any expenses incurred in administering the lottery.

When shopping for lottery tickets, look for a website that displays the current list of prizes and when they were last updated. This will give you a better idea of which games still have valid prizes and which ones are unlikely to be awarded soon. It’s also a good idea to shop for scratch-off tickets at stores that sell them frequently, as the more often they’re sold, the greater the likelihood that some of the available prizes will have been awarded.