Putting Lottery Revenue in Perspective


The lottery is the biggest form of gambling in America. People spent upwards of $100 billion on tickets in 2021. And yet, states continue to promote it as a way to help save kids or improve roads or whatever. But how meaningful that revenue is in broader state budgets, and whether it’s worth the trade-off of people losing money, is up for debate.

Lottery is a system in which prizes are awarded by chance, often money or goods. People buy numbered tickets and a number is drawn, with the person who has that number winning the prize. The word comes from the Latin loteria, which means “divided by lots,” and it dates back to ancient times. The Old Testament has Moses dividing the land among the tribes by lot, and Roman emperors used lotteries to give away property and slaves during Saturnalian feasts and other entertainments.

The modern lottery is run by state governments, and each has its own laws and regulations. Many also have a lottery division that selects and trains retailers to sell and redeem tickets, provides training on how to use the machine-based ticketing systems, assists retailers in promoting the lottery games, helps winners claim their prizes, and ensures that everyone abides by the rules. Most states also have private lotteries that are licensed and promoted by reputable firms.

In the early post-World War II period, lotteries helped states expand their social safety nets without having to impose especially onerous taxes on their middle and working classes. But the lottery has become a much larger source of state revenue than it was then, and it’s raising the risk that government spending will spiral out of control.

One way to reduce the risk of such a spiral is by making sure that lottery revenues are spent wisely. And that requires putting those revenues in perspective and understanding what the true costs of the lottery are.

The most obvious way to do that is by putting the revenue in context of other sources of state income. State lottery revenues make up only about 1.5% of total state tax collections, and the percentage that they raise from people who play is even lower.

Another way to put the revenue in perspective is by looking at how much it’s costing to run a lottery, and then considering whether those costs are justified by the benefits of the lottery for people who participate. State governments have to spend money on things like education and public safety, but they also need to balance those costs against the cost of providing an attractive environment in which people are more likely to want to play the lottery.

If you’re interested in selling your lottery payments, you can do so by choosing a buyer with the lowest discount rate. The higher the discount rate, the less cash you’ll receive. To find the best discount rate, do a search for “lottery annuity buyers” on the Internet.