Is the Lottery a Tax on the Poor?

As a pastime, lottery games are fun and harmless, allowing people to fantasize about winning a fortune at a cost of just a couple bucks. But for many, including those with the lowest incomes, playing the lottery can become a major budget drain. Critics have called it a disguised tax on the poor. The lottery has a long history, and its popularity has fluctuated along with economic trends. The lottery has been used to fund everything from the construction of Rome’s great public works to the casting of lots for a new king in England.

The odds of winning a jackpot are one in ten million or less. Depending on the prize, the prize amounts can be staggeringly high. It’s not surprising, then, that the lottery has become a popular source of funding for all sorts of projects, from public parks and housing to university scholarships and scientific research.

But even as the prize money gets bigger, the chances of winning are not getting any better. In fact, the likelihood of winning has actually declined, largely because of changes in state rules and advertising. For example, some states have lifted their prize caps, which makes it harder to hit the top prize. Moreover, some states are more aggressive in marketing their lotteries to specific demographic groups, especially to low-income households.

The reason for this is that the success of a lotto depends on drawing in a broad base of regular players. According to a study by Les Bernal, an anti-state-sponsored gambling activist, up to 70 to 80 percent of state lottery revenues come from just 10 percent of players. The rest, he says, are “super users,” buying tickets to win big prizes, but also to avoid taxes and other government fees.

To keep these super users coming back, lottery marketers have learned to exploit the psychology of addiction. Everything about the way a lottery looks and is sold—from the ads to the math behind the numbers—is designed to make players crave more tickets. In some ways, it’s not so different from strategies employed by tobacco companies or video-game makers.

Until recently, advocates of legalizing the lottery could easily argue that it would cover a line item in a state’s budget—usually education but sometimes elder care or public parks. The argument worked particularly well in times of economic stress, as voters were often willing to buy into the idea that a lottery was a replacement for taxes or cuts to public services.

But the recent recession has changed that equation. Now, with state governments facing record deficits, advocates have to offer a more nuanced argument. Studies show that the public’s support for the lottery isn’t tied to a state’s fiscal condition, and that it’s more likely to increase when a lottery supports a service that most voters want, such as education.