The Lottery is a Tax on Luck


The lottery is an ancient pastime, with roots in both the casting of lots and biblical lore. The practice was common in the Roman Empire-Nero himself liked it, for instance-and was a popular way to determine everything from the next pope to who would keep Jesus’ garments after his Crucifixion. It was also a favorite fundraising strategy for governments.

When states began to face budget crises in the nineteen-seventies and -eighties, the lottery became an increasingly attractive alternative to raising taxes. Its appeal was fueled in part by the fact that it allows people to imagine themselves wealthier than they actually are. In the end, though, the lottery is just a tax on luck.

Americans spend more than $80 billion a year on tickets, which is a lot of money for a game that has an average jackpot prize of only about one-third of a million dollars. In the best-case scenario for players, they might have a few hundred thousand dollars in winnings, but that is not much more than you’d get if you put that money into an emergency fund or used it to pay down credit card debt.

The odds of winning the lottery are so slight that a large number of players buy more than one ticket. The result is that as a group, they contribute billions to government coffers that they could have spent on health-care costs, retirement, and college tuition. If you’re going to play, make sure that your purchases are consistent with the odds of winning.

For example, don’t buy a ticket with the numbers of your children’s birthdays or ages. Harvard statistics professor Mark Glickman says those combinations have a poor success-to-failure ratio and will increase your chances of sharing the prize with hundreds of other people. Instead, he recommends buying a quick-pick ticket with randomly selected numbers.

If you win the lottery, consider requesting an annuity rather than a lump sum payment. Lump-sum payments are more likely to cause winners to blow through the entire sum quickly with irresponsible spending. An annuity, on the other hand, will give you access to a smaller amount of money each year for the rest of your life.

State and federal governments profit, too. A portion of the proceeds go to commissions for lottery retailers, overhead for the lottery system itself, and employees who run helplines after a big win. Some of the money is also used to promote responsible gambling programs. The state of Texas, for example, offers a hotline for problem gamblers.

Posted in: Gambling