Is the Lottery Worth the Cost to State Budgets?


The lottery is a fixture in modern American life, with people spending upward of $100 billion on tickets each year. In the context of state budgets, it’s a significant amount, but it’s also important to ask whether it’s worth what people pay for it.

Lottery advocates argue that, when compared to the cost of tax increases or cuts in public services, lotteries are “painless” revenue sources. This argument is often effective, especially during times of economic stress, when voters may fear that their state government is being insufficiently attentive to their needs. But the argument can be misleading. Lotteries do not necessarily raise more money than a state could have collected by raising taxes, and the proceeds are often earmarked for a particular purpose (e.g., education) rather than being left in the general fund to be spent as legislators see fit.

Critics point out that this earmarking can be deceptive, since the “savings” from the appropriation of lottery proceeds simply allow legislators to reduce the appropriations they would have otherwise made for a particular program from the general fund. And, regardless of how the funds are earmarked, there is no evidence that the popularity of lottery games is connected to a state’s actual fiscal health.

Finally, it is important to remember that, in addition to paying the prizes for winning a lottery ticket, each player pays a transaction cost – the cost of buying the ticket and marking its numbers. Some online lottery sites make this cost explicit, while others hide it behind a subscription fee.