Is the Lottery a Hidden Tax?
The lottery is a form of gambling in which numbers or symbols are drawn at random for a prize. Some governments outlaw it, while others endorse it and organize state or national lotteries. Regardless of whether it’s legal or not, the lottery is an enduring part of our culture and the subject of much debate. Some people play the lottery out of pure fun and the chance to fantasize about winning a fortune. However, others see it as a form of hidden tax that takes money from the poor to give to the rich.
The term “lottery” derives from the Latin phrase sortilegij, which means “casting of lots.” While casting of lots to determine destinies and fates has a long history in human culture—including several instances in the Bible—lotteries as a mechanism for material gain are relatively new. The first public lottery to distribute prize money was held in 1466 in Bruges, Belgium. By the 17th century, lottery games had become a popular way to raise funds for public works projects in colonial America. Many of the first church buildings, universities, roads, canals, and bridges were built with lottery money. At the outset of the Revolutionary War, the Continental Congress used lotteries to finance the Colonial Army. Alexander Hamilton wrote, “Everybody will be willing to hazard a trifling sum for the chance of considerable gain.”
Most modern lotteries use a numbering system to record the identities and amounts staked by each bettor. The bettors write their names or other identification on a ticket, which is then deposited in a pool for selection in the drawing. The pool usually returns between 40 and 60 percent of its total value to the bettors. Modern lotteries also offer scratch-off games and “quick pick” numbers, which are selected randomly by a computer program.
Lottery proceeds are largely devoted to state-designated projects, but the percentage varies by state. It’s common for a large share of the total pot to go toward administration and vendor costs. It’s also customary for retailers to collect a percentage of lottery proceeds. Those with low incomes typically make up a disproportionate share of lottery players. As a result, critics charge that the lottery is a disguised tax on those least able to afford it.
In an age of inequality and limited social mobility, lottery games seem to be a way for people to feel like they have a shot at winning the big jackpot, even though they know it’s probably not going to happen. Some of them have all sorts of quote-unquote systems that don’t jibe with statistical reasoning—about lucky numbers and stores and times of day to buy tickets—but they play anyway because, well, somebody has to win. For those with nothing to lose, the lottery might be their only hope for a better life. And for that reason, they’re a pretty good disguised tax.