Is the Lottery a Tax?


The lottery is a way for people to dream about winning a fortune at the cost of just a few bucks. But it can also be a big budget drain for many–particularly those with low incomes. In fact, many critics accuse the lottery of being a disguised tax on those least able to afford it.

Lotteries have been around for centuries, dating back to the drawing of lots in ancient Egypt and China. They were first introduced in America in 1612 by King James I of England to raise money for the colonial settlement at Jamestown, Virginia. Over the years, lottery games have been used to fund colleges, towns, wars, and public-works projects. They are regulated by state legislatures and operated by quasi-governmental agencies or private corporations.

States took in $17.1 billion from lotteries in fiscal year 2006. This amount is more than double the amount of money that was raised through direct state taxes. States distribute these profits in different ways. Some allocate them to education, while others put most of the money into general fund appropriations. New York has given the highest percentage of its lottery profits to education, with a total of $30 billion since 1967. California is second, with a total of $18.5 billion.

While most Americans approve of state-sponsored lotteries, there are some who oppose them. For example, in 1999 a national gambling poll found that 67% of respondents were more likely to play the lottery if the proceeds were earmarked for specific purposes rather than being funneled into a state’s general funds. Other concerns include the potential for problem gambling and underage gambling.

In addition to the prize money, most state-sponsored lotteries offer a variety of services to help players win. Some have toll-free numbers or Web sites that allow patrons to check prize status. Others sell scratch-off tickets at stores or gas stations. Lottery officials can also provide information about how to play, how to purchase tickets, and how to claim a prize.

Mathematicians have studied the odds of winning the lottery. One expert, Romanian-born mathematician Stefan Mandel, claims to have a formula that can predict which numbers will be drawn. He says the key is to use a large pool of investors to invest in multiple tickets, which cover all possible combinations. If enough of these tickets are sold, a mathematical formula guarantees that some will be winners. Using this method, Mandel has won 14 times. He has even shared his secret with the world.