Lottery Taxation and Gambling


A lottery is a game of chance operated by a state government, in which a ticket costs one dollar and the winner takes home a cash prize. It was first used in the Low Countries around the 15th century to raise funds for town fortifications, but has been popular since then as a source of tax revenue. The lottery’s popularity in the immediate postwar period was inspired partly by a belief that it could allow states to expand their social safety nets without onerous taxes on the middle class and working classes.

Two moral arguments have been advanced against lotteries. The first is that they are a form of “regressive” taxation, because they hit the poor and working classes harder than the wealthy, by essentially preying on their illusory hopes. The second argument is that lotteries are a form of gambling, which is illegal.

It may be tempting to scoff at these moral arguments, but they are persuasive. Most of the money raised by state lotteries comes from low- and middle-income neighborhoods, and people in these communities have a very strong urge to gamble. They do so despite the fact that they probably know that their odds of winning are very slim.

Lottery officials have tried to mitigate these effects by promoting their games as entertainment and civic duty. But that message is coded in a lot of different ways, and it obscures the regressivity of the lottery. It also obscures the extent to which a lotteries are exploiting people’s innate desire to take chances.