Site icon

Does the Lottery Fund State Programs?


Lottery is the most popular form of gambling in America, and its popularity is fueled by a myth that it helps fund state services. States, in fact, use the lottery as a way to raise revenue without raising taxes, but just how meaningful that revenue is to broader state budgets, and whether it’s worth people losing money, is debatable.

Lotteries are a long-standing tradition, going back centuries. The Old Testament instructs Moses to take a census of Israel and distribute land by lot, and Roman emperors gave away property and slaves through lotteries during Saturnalian feasts. Today, state governments hold monopoly rights to conduct lotteries, giving them the power to sell tickets to adults who are physically present in a state. Unlike private lotteries, which are privately operated and cannot compete with the official state lotteries, the profits from state lotteries go exclusively to fund government programs.

In the United States, state lotteries began to grow rapidly in the post-World War II period, when many of them were founded. This was in part a response to the growing cost of social services, such as education, that could not be paid for by onerous taxation on the middle and working classes. State legislators and governors saw lotteries as a way to boost spending on these programs without raising taxes and relieving their constituents of onerous burdens.

The first recorded public lotteries to offer tickets and prizes in the form of cash — not goods or services — were held in the Low Countries during the 15th century, with town records in Ghent, Bruges, and Utrecht listing them as ways to raise funds for walls and town fortifications and help the poor. By the end of the Revolutionary War, Benjamin Franklin was sponsoring a lottery to raise money for cannons for Philadelphia and Thomas Jefferson sought permission from Virginia’s legislature to hold a private lotto to ease his crushing debts.

Most modern lotteries are multistate games, with ticket sales and prize payouts spanning multiple states. These lotteries typically provide a lump-sum payout to winners, or an annuity for three decades. An annuity gives winners a large initial payment, followed by annual payments that increase by a percentage each year. If a winner dies before all the annual payments are made, the remaining amount passes to his or her estate.

Lotteries also promote themselves by associating with sports teams and celebrities, whose endorsements and brand recognition boost sales. Some even offer products, such as a Harley-Davidson motorcycle, as their top prizes. This merchandising helps lottery commissions, which pay the companies for product exposure and share advertising costs.

Despite the obvious risks, Americans seem eager to splurge on lottery tickets. In 2021, Americans spent more than $100 billion on lotteries, making them the most popular form of gambling in the country. State governments push the idea that playing the lottery is fun, and it’s easy to see why: the odds are so absurdly long, but there’s always a sliver of hope that you’ll be the lucky one.

Exit mobile version