The Role of the Lottery in State Budgets


Lotteries are a popular form of gambling in which participants pay for tickets, choose a group of numbers, or have machines randomly spit out numbers, and win prizes if their numbers match those drawn. While lottery games are a common part of our daily lives, the lottery’s role in state budgeting raises some intriguing questions about whether or not the government is using this tool in the best interest of its citizens.

Almost since the beginning of the modern era of state-run lotteries, critics have argued that they promote problem gambling and undermine traditional forms of taxation. Despite these concerns, state politicians have embraced the idea of lotteries as a “painless revenue source”: lottery players are voluntarily spending their money (which would otherwise be taxed) for the benefit of the state. In his new book, David Cohen offers an in-depth history of the lottery and its rise as a major source of state revenue.

The lottery is an ancient practice, dating back to Roman times when lottery games were a popular pastime during the Saturnalia. They also played a crucial role in financing the European settlement of America, and were often used despite strict Protestant prohibitions on gambling. Today, lottery players buy tickets at convenience stores, grocery stores, gas stations, and other places where the public is likely to see them, and they have become a huge component of the American economy.

Cohen explains how the modern lottery first emerged, starting with New Hampshire’s approval of the first modern state-run lottery in 1964. Other states quickly followed suit, and state governments became accustomed to the extra income that lotteries generated for them. But as the economy shifted during the nineteen-sixties and the eighties, state budgets became more and more difficult to balance without raising taxes or cutting services.

As a result, politicians looked to the lottery as a source of painless revenues. Lotteries are a very attractive form of government funding because they can be marketed to broad groups of the public with messages that appeal to people’s emotions, such as the desire for wealth or the fear of losing what one has.

In the early years of the lottery era, Cohen reports, many people took advantage of this marketing strategy by choosing their numbers based on personal events or dates. For example, many players chose their birthdates or other personal identifiers such as home addresses and social security numbers. This skews the results of the lottery in favor of middle- and upper-income neighborhoods, while depriving lower-income communities of the benefits.

As the popularity of the lottery grew, state governments began to expand it in ways that went beyond increasing the number of available games. State-run lotteries now include everything from video poker and keno to the Powerball. They have also expanded into foreign countries and made greater efforts to market themselves through advertising. As a result, the lottery has become an extremely complex and expensive enterprise, whose success depends on a delicate balance between maximizing profits and avoiding problems like problem gambling.

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