Managing the Lottery in a Post-Anti-Tax Era

The lottery is an activity from which state governments at all levels profit, and despite their proclamations that they manage the lottery responsibly, public officials are often unable to resist the pressures to increase its size and scope. The evolution of state lotteries is a classic example of the way that policy decisions are made piecemeal and incrementally, with little or no overall oversight. The result is that, as with gambling, lottery officials must focus on managing an activity from which they profit while still trying to satisfy voters who want them to spend more, and politicians who see the state’s financial health as dependent on “painless” lottery revenues.

When a lottery is set up, the state legislates a monopoly for itself and sets up a government agency or public corporation to run it (as opposed to licensing private firms in return for a percentage of profits). The first step is usually to introduce a modest number of simple games, and, with constant pressure for additional revenue, a progressively expanding variety of games is added.

Lotteries are advertised as a way for people to win big money for a relatively small outlay of their own. This appeal to the inextricable human urge to gamble is a major reason for its continuing popularity. However, it is also important to remember that the vast majority of lottery players do not win.

In order to win a prize, a person must purchase a ticket for a drawing that takes place at some point in the future. Typically, tickets must be bought ahead of time, with the draw occurring weeks or months in the future. Because of this, it is very difficult to predict how large the prizes will be at any given time. As a result, the average winning amount is very low, and the chances of winning are even worse for the smallest prizes.

The state government’s rationale for adopting a lottery is that it provides a source of revenue without increasing taxes. This is a particularly attractive argument in an anti-tax era, and it is true that the lottery does not appear to be dependent on the state’s actual financial conditions. As long as the proceeds are earmarked for some form of public good, such as education, it can enjoy broad public support. This is particularly true if the lottery is promoted in a manner that emphasizes its ability to avoid raising taxes. However, these marketing tactics may not be sustainable in the long run. As state governments increasingly rely on the revenue generated by the lottery, it is likely that they will face increased scrutiny by their citizens and legislative bodies. This, in turn, may lead to more attempts to curb the growth of the industry. This is a dangerous path that should be avoided at all costs. A reliance on gambling revenues is a slippery slope that states cannot afford to slide down. Rather, states need to look for other sources of revenue and develop policies that will be sustainable in the long term.