The Evolution of the Lottery

The casting of lots to determine fates and fortunes has a long record in human history. Moses, the Roman emperors and early colonists all used lotteries. But the modern state lottery has been around for less than a century. Almost every state now has one, with Americans spending more than $100 billion on tickets each year. In fact, the lottery is the largest source of state revenue outside taxes on individuals’ incomes. But critics say state lotteries also masquerade as hidden taxes on those who can least afford them.

A small town in eastern New Hampshire gathers for its annual lottery. The narrator describes the black box that the lotto organizers have set on a three-legged stool in the middle of town square. Its surface is worn from many generations of hands rubbing it. It contains a number of slips, each with a unique symbol. The narrator suggests that the people in the scene have been playing the lottery for years, and they have irrational systems for buying tickets and picking numbers. They may not know the odds, but they know what they like: a big jackpot, a good story, and a glimmer of hope that this time, their name will be drawn.

These are atypical lottery players. Most of the time, the players who buy lottery tickets are poor and they spend large sums of money on them. Some studies suggest that low-income people account for a disproportionate share of the total ticket sales.

Despite the bad headlines about lotteries, public opinion continues to be overwhelmingly supportive of them. But the evolution of state lotteries is a classic example of public policy being made piecemeal and incrementally, often without a broad overview. Lottery officials are often subjected to pressures from specific constituencies, such as convenience store owners (lotteries tend to have high commissions on ticket sales); lottery suppliers (heavy contributions by their vendors to state political campaigns are reported); teachers in states where lottery revenues are earmarked for education; and of course the general public (who, by buying a ticket, implicitly endorses the policy).

The way that state lotteries evolve also obscures the regressiveness of their operations. State lottery officials typically begin with a modest number of relatively simple games and then, under constant pressure for additional revenues, progressively expand their offerings, adding more and more complex games that appeal to the more committed and wealthier players.

Scratch-off games are the bread and butter of lotteries, making up 60 to 65 percent of total sales. They are by far the most regressive games, and it is poorer people who play them.

When you win the lottery, it’s important to remember that a lump sum payout will mean significant income tax bills. To minimize the tax bite, you can choose to receive the prize in a series of payments, or set up a charitable entity such as a private foundation or donor-advised fund and make a gift in the same year that you claim your lottery winnings.