The Official Lottery – Funding Public Projects Without Raising Taxes

Official lottery is a form of gambling in which a prize (often money) is distributed among players by lot. The first recorded lotteries date to the fifteenth century in the Low Countries, where towns used them to raise funds for town fortifications and to help the poor. In modern times, state governments have embraced lotteries as a way to fund public projects without raising taxes.

In his new book, Cohen argues that this shift started in the nineteen-sixties, as states grappled with budgetary crises spawned by inflation and the cost of the Vietnam War. In his view, these states were facing a “decision point,” in which they needed to find ways to maintain public services without increasing taxes or cutting programs—both options that would have been extremely unpopular with voters.

The obvious solution was the lottery. Lottery games, Cohen writes, were viewed as “budgetary miracles” that would magically appear out of nowhere to provide funding for a state’s needs without any painful political costs.

But this narrative glosses over the fact that lottery revenues are a drop in the bucket when it comes to actual state government spending. Between 1964 and 2019, the proceeds of lotteries totaled about $502 billion, but that represents only about 1 to 2 percent of state revenue. Moreover, lottery proceeds are inefficiently collected, and the vast majority of dollars go to ticket holders instead of state coffers.