How Does the Lottery Fit Into State Budgets?

Americans spend over $80 billion on lottery tickets each year, making it the nation’s favorite form of gambling. The states promote the games as ways to raise revenue, but just how meaningful that money is in broader state budgets and whether it’s worth the trade-offs to people who lose their money deserve serious scrutiny.

Lottery traces its roots back to the fourteenth century, when towns in the Low Countries used it to fund fortifications and to provide charity for the poor. It was one of many forms of gambling that spread across Europe, eventually making its way to America and helping to finance the first English colonies despite Protestant proscriptions against such activities.

In the 1960s, New Hampshire became the first state to introduce a lottery and seventeen more did so within a few years. At the time, many states were casting around for ways to balance their budgets without enraging an increasingly anti-tax electorate; lottery proponents saw it as an alternative that could deliver tax revenues with minimal fuss.

But the lottery is a classic example of a policy crafted piecemeal and with little oversight, and the resulting systems have grown up in a way that does not take into account public welfare. For instance, studies have found that the lottery’s popularity is largely independent of a state’s actual fiscal health, and that most of its players come from middle-income neighborhoods rather than from high or low income areas.