Lottery: A Tax on Stupidity

Lottery has long been a popular way for governments to raise funds for public projects without raising taxes. In the modern era, it has also become a source of national obsession, as people dream of winning massive jackpots that would give them unimaginable wealth. This phenomenon coincided, Cohen argues, with a decline in financial security for many working Americans. From the nineteen-seventies onward, incomes stagnated and wages fell, job security disappeared, health-care costs soared, unemployment increased, and the national promise that hard work would pay off was gradually eroded.

During this time, lottery playing skyrocketed. The fervor for winning the big prize has fueled a culture of fantasy and delusion in which many believe that they can change their lives overnight. As a result, the number of tickets sold has grown exponentially, and the amount of money that has been won by individuals has ballooned as well. Lottery players, whether they realize it or not, have been paying a price for this hope.

In the United States, lottery play is very popular among low-income communities, particularly those that are racial minorities. In fact, more blacks and Latinos play the lottery than whites do, and they spend far more money per ticket. These numbers are reflected in the profits that lottery companies make. According to a study by the Center for Economic and Policy Research, lotteries earn more than $5 billion a year in total sales and profits. The lion’s share of this revenue is paid out as prizes to winners, and the rest goes toward administrative expenses.

Some people who oppose state-run gambling argue that it amounts to a “tax on stupidity.” They contend that lottery players do not understand how unlikely it is to win and that they waste their money. But Cohen points out that this argument ignores the fact that lottery revenues are largely responsive to economic fluctuations. They increase as incomes fall, unemployment rises, and poverty rates increase. Furthermore, lottery advertising is most heavily promoted in neighborhoods that are disproportionately poor, black, or Latino.

While some critics have cast lotteries as a form of hidden taxation, Cohen argues that they are a legitimate tool for governments to raise money for public purposes. In fact, he believes that lotteries have played an important role in America’s history, including as a way to finance the Revolutionary War and early American colleges. Lotteries provided a way for states to maintain services without raising taxes or cutting programs, which were both unpopular with voters.

The first known public lotteries awarding money prizes appeared in 15th-century Burgundy and Flanders, with towns raising funds to build town fortifications and help the poor. While rich people do buy lottery tickets, they usually purchase fewer tickets than do the poor, and their purchases represent a much smaller percentage of their annual incomes. Lotteries have also been used for military conscription, commercial promotions in which property is given away by random procedure, and to select jurors.