Why Governments Run Lottery


Lottery is a game where you buy a ticket with numbers on it and hope that some of those numbers are drawn. Governments run many of these games to raise money for various public projects, like roads and schools. Lottery is one of the most popular forms of gambling, and rakes in over $100 billion per year. That makes it the second largest industry behind sports. The prize is often money, but some people have won homes or cars with the winnings.

The concept of a lottery is as old as civilization itself. Moses was instructed to divide land by drawing lots in the Old Testament, and Roman emperors gave away property and slaves through similar arrangements. But the modern lottery is a state-sponsored gambling scheme, which began in Europe in the 16th century. A ticket costs one dollar, and the prizes are usually large amounts of cash.

In the US, states sponsor lotteries in order to fund a variety of programs. For example, some lotteries give away units in subsidized housing and others place kindergarten students at good public schools. In these cases, the monetary prize may outweigh the disutility of losing the chance to participate in the lottery. But even if the monetary prize is not as high, the tickets can still offer entertainment value and have other non-monetary benefits for participants.

But the biggest reason state governments run lotteries is that they can generate a lot of money without raising taxes. Each dollar from ticket sales is funneled into a pool from which the prize money is drawn. The total amount paid out to winners usually exceeds the cost of running the lottery, so states make a profit each time a ticket is sold.

A state’s profit comes not only from the proceeds of the lottery, but also from income taxes that are levied on winners. Only a handful of states don’t tax their residents, but the rest do, with New York and Florida topping the list for those with the highest state income taxes on lottery winnings.

The fact that lottery profits are so much larger than income taxes shows that the system is regressive and exploits the poor in particular. It’s easy to look at billboards offering a huge jackpot and assume that people are spending their money foolishly, but the truth is more complicated. The vast majority of lottery players are in the 21st through 60th percentiles of the income distribution, which means that they don’t have a lot of discretionary dollars to spend. They may play the lottery because they have a deep-seated desire to win, and the big prizes are tempting.

Lottery advertising campaigns have tried to hide the regressivity by promoting it as an entertaining activity. But if you talk to lottery players, especially those who regularly spend $50 or $100 a week, you quickly realize that they don’t see it as a joke. These are serious gamblers who believe that their luck will change in the next draw.