Sign up FAST! Login

The lottery is a tax. An inefficient, regressive, and exploitative tax.

Stashed in: Facts, Business Facts, Economics!, Education!, Addiction, Awesome, Gambling!, Math!, America!, economics, Pants on fire!, Poverty, Economics, Poverty, Addiction, Freakonomics, Personal Finance, Lottery

To save this post, select a stash from drop-down menu or type in a new one:

In 2014, Americans spent $70 billion on the lottery.

Seventy. Billion. Dollars. 

Lotteries don't really raise money for education.

When lotteries give money for education, tax dollars get pulled out and spent elsewhere.

Most state lotteries pre-commit, or earmark, their money for a particular cause, usually education. This should come as no surprise if you’ve ever seen a lottery commercial. Supporting a “good cause” is one of the primary messages they use to promote themselves, both to players and to the voting public.

It’s true that lottery money does go to into a special fund for education. But that only serves to free up tax dollars, which get pulled out of education and spent elsewhere. And in the end the schools are no better off.In the case of New York, the state Comptroller called this idea a “myth” in a 1998 report, stating “lottery earnings have been earmarked for education primarily as a public relations device.” A 2013 investigation by City Limits reached a similar conclusion.

Lotteries are not a tax on the stupid. It’s a tax on addicts, and their families.

More than half of U.S. adults play the lottery occasionally, but only a small percentage of those players account for most of the sales. 

According one report54% of lottery sales come from only 5% of players (roughly 2.5% of U.S. adults).

Pathological gambling is classified by the American Psychiatric Association as an addiction. It affects an estimated 1.7% of U.S. adults. And contrary to the casino-going stereotype, more gambling addictions are related to lottery than any other game.

Pathological gambling is more common among people with less income and lower levels of education, which raises an obvious question: 

How can someone making less than $15,000 afford to spend so much on the lottery?

State lotteries portray their income as coming from entertainment budgets or as a substitute for other forms of gambling, but the data tells a different story.


  • The government should get out of the lottery-for-profit business. Their incentives are completely at odds with the government’s responsibility to protect the welfare of its citizens.
  • The government could offer a lottery alternative that actually benefits the players, such as prize-linked savings accounts. So far, most state governments have prevented businesses from offering them, though there are a few exceptions. The most notable are Michigan, Nebraska, Washington and North Carolina, all of which allow credit unions to offer prize-linked accounts. Collectively, they have generated $94M of savings, with 60% of the participants identified as “financially vulnerable.”
  • Allow private businesses to offer lotteries and compete with each other. Doing so would improve the odds for players, and it would allow the government to regulate them without conflicts of interest.
  • At the very least, if state governments are going to continue offering lotteries, they need to be regulated at the federal level and with the same standards as private businesses.