The Regressive Nature of State Lottery Funding

Across the country, state lottery participants purchase chances at winning millions of dollars while helping to finance the educational and other public needs of their sponsoring states. State lotteries capitalize on the fact that people tend to underestimate their odds of winning, and they are a highly profitable form of government finance.

Almost three-fourths of all states have a state lottery. Its supporters argue that it is a painless revenue-raiser that provides a useful alternative to raising taxes. Its opponents accuse it of being dishonest, unseemly, and of being a regressive tax on the poor.

Like other forms of gambling, the lottery exploits the psychology of addiction. Everything about it, from its ad campaigns to the way that the tickets look and the math behind them, is designed to keep people buying tickets. But it isn’t normal for a government to do this.

In his new book, For a Dollar and a Dream, the economist Michael Cohen, an expert in state budgets, surveys the history of state lotteries, explains their regressive nature, and analyzes how they foster gambling addictions and discourage normal taxation. Cohen argues that they should not exist.

The data show that most of the people playing the state lottery come from middle-income neighborhoods and that far fewer play in low-income neighborhoods than is typical of the population as a whole. This imbalance, along with other factors, makes the lottery regressive.