The Benefits of Raising Revenue From the Lottery


The lottery is a form of gambling in which numbers are drawn to determine prizes. It is a common method of raising money for public projects. It has been used since ancient times. Many governments ban or restrict lotteries, but the United States is one of a handful that still holds them. The word “lottery” is derived from the Dutch noun lot, meaning fate or destiny: the outcome of something that depends on chance:

Lotteries are not only popular but also effective at raising revenue for state programs. They have been around for a long time and are often used to finance public works, such as roads and bridges, and to raise funds for specific educational purposes, such as scholarships or grants.

They can also be used to fund state-owned enterprises and provide relief for the debt of cash-strapped localities. In addition, they are a source of tax revenue, and thus have become a mainstay of state budgets in the twentieth century. In fact, there is little evidence that they have had any detrimental effects on economic growth.

Historically, state lotteries were little more than traditional raffles in which the public purchased tickets for a future drawing to decide prizes. In the 1970s, however, innovations were introduced that changed the nature of the industry. These new games — known as instant games — resemble scratch-off tickets and allow players to win smaller prize amounts for the purchase of a ticket that is sold at the same price, or less, than traditional raffles. The resulting instant games have been highly successful in attracting players and raising revenue.

The major argument for state-sponsored lotteries is that they are a source of “painless” revenue, that people play them voluntarily and that the proceeds are a good alternative to taxing middle-class and working-class taxpayers. But this claim is misleading. First, it conflates state spending with lottery revenues, and it ignores the fact that state government has always been a collection of voluntary contributions from those who choose to participate. This arrangement was a success in the immediate post-World War II period, but it has been eroded by inflation and the costs of social welfare programs.

Secondly, the claim that winning the lottery is “fair” obscures the fact that it is regressive. Although some people use irrational strategies to increase their chances of winning, others make rational decisions and spend a significant portion of their incomes on the tickets. This is not unlike the way governments impose sin taxes on vices, such as alcohol and tobacco, to raise revenue. Nevertheless, these taxes are much more regressive than a lottery.