The Costs of Playing the Lottery


The lottery is one of the most popular forms of gambling in the United States, with Americans spending upward of $100 billion on tickets each year. It’s an easy way for people to fantasize about a huge windfall, and it’s a lot cheaper than many other types of gambling. But it’s not without costs, and those costs can be especially steep for low-income people.

The history of state-run lotteries is a complicated affair. In the immediate post-World War II period, states found themselves needing to expand their array of social services without the arduous task of raising taxes, so they turned to the lottery. But that’s just part of the story. There was also the belief that people are going to gamble anyway, so the government might as well nudge them in this direction in order to generate some revenue.

In order to nudge people into playing, the states created many different kinds of games. They offered scratch-off tickets, instant games with drawings every so often, and even lotteries that let players choose their own numbers and then have machines randomly select them. Most of these games cost only a dollar each.

Most of the profit from these games was allocated to specific beneficiaries, such as education. New York, for instance, has distributed $234.1 billion in lottery profits to schools since the first game was launched there in 1967. California has given $18.5 billion to education, and New Jersey has allocated more than $15 billion.

While people buy lottery tickets because they’re fun, critics point out that the games are a form of taxation on those who can least afford it. Numerous studies have found that the lion’s share of lottery participants are those with lower incomes, and many of these people spend large chunks of their budget on tickets.

It’s also important to remember that just because someone wins the lottery doesn’t mean that a person can’t win it again, or that a player won’t be able to find a better strategy next time around. In fact, the rules of probability dictate that a lottery player’s chances of winning are not affected by how often they play or how many tickets they purchase. Each drawing has an independent probability, and it doesn’t matter how many times you’ve played the same numbers or whether you’ve chosen a certain pattern.

It’s also worth pointing out that while some people argue that the lottery should be regulated, there are other ways for state governments to raise money without having to ask hard-working taxpayers for more of their hard-earned dollars. Some examples include a lottery for units in a subsidized housing project or kindergarten placements at a reputable public school. These types of programs would be more palatable to the public than simply increasing tax rates for everyone in the state. But that’s another story for a future article. For now, you can keep up with all of our latest personal finance articles by following us on NerdWallet.