Lottery is a popular way to raise money for states and other entities. But the industry isn’t without controversy. Some say it encourages gambling addiction. Others argue it’s a “hidden tax.” And yet, people are spending billions on lottery tickets each year.
The history of lotteries is long and tumultuous. In the 17th century, the Dutch hailed them as a painless way to collect money for a wide range of public usages, including paying the poor. They were so popular that many other countries copied the concept. Even the founding fathers used them: Benjamin Franklin ran a lottery in Philadelphia to raise money to build Faneuil Hall, and George Washington ran one to fund a road over a mountain pass in Virginia.
But it’s also true that lotteries tend to be regressive: The bottom quintile of the income distribution spends a larger share of its discretionary income on tickets than other groups do. That means they have less money left over for other things, including opportunities to live the American dream or pursue entrepreneurship. That makes lottery playing a big part of the reason for the growing income inequality in America.
It’s also worth noting that the lottery is a huge source of revenue for state budgets, and it plays a major role in raising children through school choice. But just how meaningful that revenue is to broader state budgets — and whether it’s worth the trade-offs for people losing money — is an open question.