Is the Lottery a Hidden Tax?

In colonial America, lotteries played a big part in financing public projects. They helped finance roads, canals, schools, churches, and colleges. During the Revolutionary War, lottery proceeds helped fund the Colonial Army. They also became a popular source of revenue for public services in states that couldn’t raise taxes without outraged voters. During this time, the specter of a “hidden tax” was widespread. In an attempt to assuage this fear, a number of states began to advertise their lotteries as beneficial and socially responsible.

Lotteries aren’t really a hidden tax, though; the vast majority of players spend far more than they win. Lottery revenues have a long history, starting in the Old Testament with Moses’ instruction to cast lots for land, and continuing through Roman emperors’ giving away slaves and property by the same means. The idea of a random drawing for wealth has also been an important feature of American culture, beginning with Benjamin Franklin’s suggestion to draw names from a hat for a gift of silver.

Modern lotteries are more sophisticated than ever before, but they still rely on the same basic principles. They establish a state monopoly; start with a small number of games, often with very low odds of winning; then, to increase sales, gradually raise the odds and add new games until they become almost impossible to win. In this way, they’re not so different from tobacco companies and video-game makers, whose strategies are designed to keep their customers hooked on the product.

It’s important to note, however, that the popularity of lotteries is largely driven by their jackpot sizes, which get lots of free publicity on news sites and broadcasts. If the jackpot is too small, people will buy fewer tickets; if the prize becomes too large, the ticket sales will drop as well. To make sure the jackpots stay at headline-worthy levels, the odds of winning are adjusted by raising or lowering the number of numbers on each ticket.

Cohen argues that the explosion in lottery sales since the nineteen-seventies has coincided with a decline in financial security for most Americans, as income inequality and unemployment have risen, pensions and job security have faded, health-care costs have skyrocketed, and the old promise that education and hard work would guarantee a better life for our children has turned into a nightmare of increasing debt and uncertain prospects. Lottery proceeds help make up for these losses, and it’s no wonder that a majority of Americans support them.

Defenders of the lottery argue that the money goes to a good cause, and many people are simply unaware of how unlikely it is to win. But this claim overlooks the fact that the lottery’s appeal is also a reflection of the decline in economic stability. Lottery sales spike when incomes fall, unemployment rises, and poverty rates soar; as with any other commercial product, lottery sales increase when there is advertising—which tends to be heavily concentrated in poor neighborhoods, where most lottery participants are Black or Latino.