In the United States, state lotteries raise billions of dollars a year and attract millions of players. But despite their popularity, they also generate intense debate and controversy. Criticisms range from complaints about the alleged regressivity of lottery prizes to worries that lotteries promote gambling addiction and societal problems such as crime, drugs, and poverty. Despite these concerns, a cost-benefit analysis shows that compared to other tax revenue sources, state lotteries tend to bring in more money per player than they raise in expenses.
While critics often focus on the problem of compulsive gamblers, regressivity, and other issues of public policy, many lottery opponents are really motivated by a deep dissatisfaction with the existing social order. In the case of a lottery, this manifests itself as anger directed at the poor, who are perceived to be wasting their money.
Throughout history, the practice of allocating property and goods by lot has been a powerful political tool. For example, the Old Testament instructed Moses to take a census of Israel and divide land among its inhabitants by lot; Lotteries were popular in Europe by the seventeenth century. George Washington used a lottery to raise funds to fight the American Revolution, and public lotteries helped build Harvard and Yale, as well as paving streets and building wharves in colonial America.
A modern lottery, which is usually regulated by the state, is typically based on a fixed percentage of ticket sales. The remainder of the revenue (after a small profit for the promoter and other expenses) is distributed as prize winnings, which are usually divided into multiple categories, with the largest prizes offered first and others decreasing in value as the size of the remaining tickets shrinks.
Although the lottery is a major source of state revenue, few people realize that the prize money they receive from buying a ticket represents a kind of indirect tax on them. This is because, unlike most taxes, which are imposed on income, lottery revenues are not reported as such and are not collected directly from consumers by the government. This is one reason that it is so difficult to impose a lottery tax.
Because of this, state lotteries are able to operate at cross-purposes with the public interest. Their primary function is to advertise the fact that they offer a chance to win big and are therefore worth spending money on, but this promotional strategy necessarily runs counter to the larger public concern about the regressive nature of gambling.
In addition, because the lottery is a business that is run by a commercial company with a strong emphasis on maximizing revenue, its advertising necessarily communicates an anti-tax message and encourages people to spend more money than they would otherwise, rather than encouraging them to save or invest their money in other ways. In this way, the lottery undermines the traditional role of governments in promoting responsible consumption and saving habits. It is no wonder that so many people are upset about the lottery.