The $73 billion in Voluntary Taxes (up 9%!) Consumers Pay Eagerly and with Great Excitement

And states need it!

Tax day is approaching, and the gnashing of teeth is spreading across the nation. But there is one tax that people love to pay voluntarily – and have a huge amount of fun and excitement doing so: the lottery.

Playing the lottery is a special tax for people who cannot do math, it has been said. It’s definitely a special tax – the only such tax – because it is fun, exciting, and even addictive. It makes people eager to pay this tax. In fact, it is such a fun tax to pay that even consumers who don’t have to pay income taxes because they lack sufficient taxable income are also eager and able to pay the tax.

The proceeds from the lottery in the US go to state governments, along with other tax collections, such as sales taxes and income taxes. But those other taxes have to be extracted, if needed by the force of law, from more or less unwilling tax payers — the same people who eagerly pay the tax that is called lottery.

And it’s a lot of taxes: $72.75 billion in total lottery revenues (excluding commissions) were generated in the US in 2016, according to Census Bureau data on state finances, released this week. This was up 9% from 2015. At least something is booming in the US economy!

But it doesn’t all go to state governments. Of those revenues: $46.6 billion were paid out in prizes. Administration and promotion of lottery programs cost another $3.2 billion. The “proceeds available” — what’s left over for state funds — amounted to $22.9 billion.

So this is a tax that is fun and exciting to pay, but it also costs a lot for states to create this fun and excitement.

On a per-capita basis, spending grew 8% from a year earlier to $225.15 per person, on average, from baby to 100-year-old, based on a US population of 323.1 million in 2016.

It amounted to $577 per household on average. Given that many households don’t play the lottery, the average among households that do play the lottery is much higher.

New York State residents generated the most in revenue, with a total of $8.34 billion. California was second with a total of $6.28 billion. Third was Florida with $5.7 billion. That the big states would lead is logical. But fourth was the tiny state of Massachusetts with $5.2 billion.

On a per-capita basis, the most prolific spenders — the most eager to give to their state — were in Massachusetts with a lottery expense of $762.98 on average.

Six states — Alabama, Alaska, Hawaii, Mississippi, Nevada, and Utah — don’t have state lotteries, don’t sell tickets for multi-state lottery games, and residents in those states spend zero on this tax.

This chart shows the per-capita lottery spending in 2016, based on total lottery spending in the state divided by the state’s population (per-capita data via LendEDU):

“Winning the lottery” has become a cliché for a life-changing jump in wealth or some other mega-great event against huge odds. Statistically speaking, when people buy a lottery ticket, their chances of winning the jackpot are minuscule, and they’re nearly guaranteed to be disappointed. The chances are much better for smaller winnings, but on average, people will also be disappointed.

That’s the idea – allow a very small number of people to win very large sums, often measured in the hundreds of millions, which is what creates the excitement, when the total take across participating states can amount to tens of billions. The theory behind the lottery is to provide a fun, exciting, and even addictive way of paying additional taxes voluntarily, on top of the taxes that people have to pay already.

The lottery is heavily promoted in the media, and as the jackpot grows to $500 million or whatever, which is the case right now, the whole country is talking about it, and people storm to convenience stores at the last minute to buy their way out of their current situation, which just increases the take for the states.

In 2018, if recent growth trends hold, people will eagerly pay their states well over $80 billion in these voluntary taxes. And the lucky jackpot winners will also pay state and federal governments large sums for the privilege of having won the jackpot – income taxes being due on the gains. Alas, I wish – as I’m gnashing my teeth about the income taxes due on tax day – someone could figure out how to make paying all taxes this fun, easy, and exciting.

Where are the Most Splendid Housing Bubbles in the US? City by city, with some flat spots disappearing, new ones forming. Read…  Update on the Most Splendid Housing Bubbles in the US

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  72 comments for “The $73 billion in Voluntary Taxes (up 9%!) Consumers Pay Eagerly and with Great Excitement

  1. Drango says:

    Why would I need to buy a lottery ticket when all of my assets are being managed by a wealthy Nigerian prince?

    • RagnarD says:

      I only buy lottery insurance. That is, when there is a office pool for the mega state lottery, I ALWAYS want to have skin in that game. Why? Because $1 or $5 once every so often is a SMALL price to pay to not have a lifetime regret for being the only person to still have to show up to work the next Monday.

      The odds of winning the lottery are irrelevant in relation to the psychological damage / regret I’d have to endure, for the rest of my life, if my coworkers hit it big.

      A variation on Nassim Taleb’s ideas on avoiding existential risk.

  2. Memento mori says:

    Lootery is simply a government tax on people’s dreams.
    We have gone full circle, the only thing government hasn’t taxed yet is the air we breathe. Climate change will give the necessary impetus to do so.

    • TJ Martin says:

      Place the blame firmly where it belongs . Upon the shoulders of the deluded minions that line up like lemmings on the edge of a cliff to buy their lottery tickets .. not on the governments greedy and smart enough to take advantage of their gullibility

      • RagnarD says:

        So the blame is on ppl with ~85IQ getting snookered by their very own government? Snookered by mathematicians and marketers with IQs likely >125, or near 3 StDev higher than themselves?

        Is it not almost the same predatory game played by credit card companies on the mathematically challenged low IQ poor?

    • Tom Jones says:

      As someone once said: ”For oxygen please enter your Apple ID.” (Coming in the near future to a vender near you; and even now if you’re in medical need of it.)

  3. Edward Hall says:

    I love it when I enter a travel plaza out south West and right next to the gambling and lottery machines there are signs pointing to the FREE government assistance programs I am paying for to break the gambling addiction.

  4. raxadian says:

    My dad could do math but he gambled anyway, at least he knew when to stop. I have seen people literally lose everything thanks to gambling. At least I got rid of that vice while young, nowadays the only gambling I do is trusting banks with my money and yes that is a gamble.

    Anyway, buy US treasuries while the pot is hot, definitely not gambling!

  5. Petunia says:

    In the past week I have seen at least 5 ads for binary options. Pick a stock and guess if it will be up or down by a certain date. What’s the difference between a binary option and a lotto ticket? I don’t see one.

    • Enrique says:

      The lotto ticket is usually associated with a state agency (government –
      corrupt and despicable but in a traditional sense) whereas the binary option exchange is often an outright scam. I believe many/most/all of those outfits actually trade against their customers.

      • d says:

        Israel finally made the binary racket, illegal there.

        When the Israelis make a financial operation Illegal, its bad, VERY VERY BAD.

        Binary options Available (or that have been Available) on any trading platform, are an instant huge red flag, for that platform.

    • NY Geezer says:

      I must be missing something. Why would a gambler not simply buy a put or call option instead. Is a binary a cheaper or better option?

      • Gary says:

        Too much thinking required for calls and puts. Binary is like a roulette roll.

    • jest says:

      The odds!

  6. cdr says:

    No, man, you don’t get it. Tomorrow I will win over $300 million, if taken all at once after taxes for only $2 cost to me. My job for life will be to p*ss it away. My hope is that I won’t get too obnoxious along the way. If I fail at that, I’ll be too rich to care.

    • cdr says:

      Oh, you might say, I’m being selfish. I should spend some on the needy and poor who deserve it so much. Especially those who are the wrong religion or color or have other differences.

      Not going to happen. Perhaps indirectly or after I die but not next week.

      If Bill Gates and Warren Buffet combined can’t end inequality and poorness issues, nor can the ECB with unlimited printed money at its disposal, then why should I jump in and see my new wealth flushed away.

      It’s all for me and mine.

  7. Setarcos says:

    The amounts spent on lotteries is eye-opening, especially the per person or household stat’s you included. Along similar lines, a recent study highlighted that the majority (>60%) of Americans could NOT cover a $1K emergency. Reminds me of Orwell’s 1984 where the Ministry of Plenty administered the lottery, which was the only thing people looked forward to.

    Aristotle observed that true statesmen promote virtues among the citizens. And by extending his observation…virtuous citizens are capable of electing true statesmen, i.e. a self-reinforcing system. Hmmmm

  8. Jack be nimble says:

    Hey first time commenting. This article was really interesting make those taxes almost 2 trillion dollars then. I was hoping to get into contact with Wolf. I am a Undergrad at Sac State getting my BA in economics. One wonders if I could ask Wolf some questions about his experince in the world of Corperate America and travels aboard.


    A lost young guy

    • Wolf Richter says:

      Click the “Contact Us” tab and use the email address that you will find there.

      Here’s a fiction version of part of my “experience in Corporate America”:

      And here is a small part of my travels (nonfiction):

    • cdr says:

      I have a BS in econ. Please, study something useful that will get you gainful employment, Most useful economics can be learned in a few courses, providing you ignore the useless stuff the textbooks and profession feel compelled to teach. Econ 101 micro, macro, international, and managerial or industrial org/prices will get you far. The rest is total total total cr*p, especially anything made mathy. Econ, as it exists in the actual world, is more theology than science and is used to provide justification for all sorts of scams. The math makes it look realistic.

      Also, the big money investment leaders are all salesmen first and last. They live on fees and commissions. If they really had special insights, they wouldn’t be hyping their latest ideas. They would be rich and on their own island somewhere. nNone are monks who feel the need to share the wealth.

      I also have A CPA license and a hobby concerning fraud. Learn econ, some accounting, then study fraud, and go after the bad guys.

      • cdr says:

        The best advice I ever received was “never play someone else’s game”. It actually centered me and still does. Keep that in mind and your studies and career will be stellar.

        • TJ Martin says:

          To put it slightly different in the words of my business professor back in the day ;

          ” Don’t ever compete directly . Do something different or fill a void or a niche in their market they cannot or are not willing to ”

          [ I gave a local wine shop owner that advice just as he was on the brink of going under . Within eight months of taking that advice along with a couple of specific ideas of my own his business is now thriving ]

          One more piece of advice for Jack be nimble . A BS in much of anything is hardly worth the paper its printed on both in finding employment as well as getting accepted into most advanced degree programs . Change over to a BA program even if it means changing schools . But only do so if you have ( very ) clear goals as to what you’re going to do with that degree etc . Otherwise … with the demand as high as it is , decent pay etc … learn a trade and get paid as you go e.g. plumber , carpenter , electrician , HVAC ( especially HVAC ) etc .

        • alex in san jose AKA digital Detroit says:

          TJ Martin – soooo on point.

          “Be where they ain’t” – some boxer.

          If I’m looking to make some money on some electronics surplus, and a seller’s got a bunch of oscilloscopes he’s got priced at near what I’d get for them, pass. But he might have a literal barrel/trash can full of cables and probes he doesn’t want to bother with that I can buy for a song because he doesn’t want to load them back into his truck at the end of the day.

          Before I became a small business man (maybe tiny business man) I thought the retail world was “red in tooth and claw” and instead I was amazed at the levels of cooperation and even collusion that are normal. Not saying there’s not a bit of back-stabbing, but it’s really a tiny factor. And the bad actors, we tend to all know who they are and laugh at them behind their backs (and warn people about them).

        • cdr says:

          TJ, Alex,

          Actually, I was thinking more about all the people who try to hustle you. The world overflows with them and many try to look like they’re your friends. Economics defines the phrase, but there are everyday applications too.

  9. Old Engineer says:

    I don’t about the other states without lotteries but the residents of Alabama, which does not have a lottery, do not “spend zero on this tax”. People from Huntsville drive to the Tennessee line about 30 miles away on a regular basis to help pay the Tennessee taxes. Florida is another popular state that people from Alabama like to help pay their taxes. People traveling to the north Florida beaches take money from friends and neighbors to buy tickets for them
    So not only to people like to pay these fun and exciting taxes voluntarily, they don’t even care which state the taxes are being paid to, it is so exciting.

    • Drater says:

      Similarly Las Vegas residents, despite living in a gambling mecca, drive to the state line at Primm to purchase their lottery tickets. I believe the lottery store there is the busiest in CA

    • Ron says:

      Utah residents flock to Idaho and pay their taxes there

    • Night-Train says:

      Old Engineer – Don’t forget how many Georgia kids we Bama folks have sent to college.

    • govinda says:

      Hawaii may not have a lottery but they dont call Las Vegas “the ninth island” for nothing. Package deals galore, people go multiple times a year and some even own condos there. Theres also a lot of illegal gambling in the state – seems to be mostly asian and involving machines. Locals also like to gamble over cock-fighting, thats a big thing too.

  10. jdmo says:

    a tax on dreams? innumeracy? more like a tax on stupidity.

    • Robert_D says:

      (Changing to Robert_D, from Robert)

      To your post, ‘Innumeracy’ – – – that is one of my favorite topics.

      To begin with, I am neither a proponent of the lottery, nor am I a player, OK ?

      But we can examine it critically, or mathematically, as many have done in this comment thread. I applaud ALL of the critiques, and here is my additional two pence :

      People say this, and I quote, “I WAIT until the pot is ‘X’ hundred million, then I buy tickets . . . ” {for all integer values of ‘X’ }.

      Here is my sense of the innumeracy of that position, “What . . . . IS 50 MILLION NOT ENOUGH ? or 25 million ? 10 million ? Five ?”

      I tell these innumerate “voluntary tax players” that spout this nonsense, this, “You will not be, will never be, the one in 200 million (or whatever) who wins. Not. Never!”

      The argument is lost, they all say — to a person — some version of “Lightening strikes!”, but who do they know who has ever seen struck by lightening ? Few if any.

      HERE IS MY POINT, and I say this every time, “If you must spend your money on this so-called ‘dream’, buy a scratch ticket with a million dollar prize, often $50K (pre-tax) per year, for 20 years. I personally know people who have won this.”

      Lightening does strike, FREQUENTLY, for people who buy scratch tickets with MILLION DOLLAR PRIZES ! !

      Again, I am not advocating investing in the Lottery Stock market. But if a person must, at least invest in a Lottery ETF or EFT that actually pays out to your neighbors, your family, and your friends.

      Here is the evidence, the PROOF :

      And there is not a two-hundred million dollar winner in the lot.

      Again,I am not advocating Lottery Play at all, just a more sensible approach — than waiting for a $500M pot and then piling on. Ridiculous !


      • Max Power says:

        The best strategy is not to play the lotto at all becuase the odds are so incredibly slim. However, if you were going to play anyway, the one million $ (really more like $750K after taxes) scratch off ticket is not a good strategy either. If you want to play the odds you’ve got to do the math.

        Here is an example… in Virginia we have two games with a $750,000 cash prize. A $10 scratch off with odds of 1,162,000:1 and a lottery game (Bank A Million) with odds of 3,800,000:1. If you played $10 worth of $1 panels of BAM you’d have a 380,000:1 chance of winning $750,000. In other words, 3 times better chances than the scratch off. So, if you were going to play the state lottery, you’re actually better off with the lotto game rather than the scratch off.

        Where it gets crazy though is like you said, with the big bucks jackpot games. The odds of winning the mega millions or power ball are about 300,000,000:1 per $2 play. So, taking the example above, if you played $10 worth of panels in lieu of one of the two games above, your chances of winning the grand prize are 60,000,000:1. That said, both the powerball and MM also have a 1 million cash prize, whose odds are about 12,000,000:1. Therefore, the odds for a $10 play are about 2,400,000:1. A rational person looking at this would probably play the $750K lotto instead since the odds of winning its grand prize are about 160 times greater, or more than 6 times greater for the $1 mil prize.

        Unfortunately, most people are not particularly good at math, which is bad for them but good for the gubbemint ;-)

        • elysianfield says:

          “The odds of winning the mega millions or power ball are about 300,000,000:1 per $2 play”

          The issue is not your calculated chance at winning, but rather whether they pay true odds or not. Mega Millions must pay 600 million dollars for a single ticket to receive even odds(and this discounts the machinations the state employs to pay out the win). Anything less than a 600 million dollar jackpot in Mega Millions is a sucker bet.

        • Robert_D says:

          To Max Power,

          My point was a general point, indeed the exact point you are making. Play a better game with better odds. That’s all. There are so many states, and oftentimes scores of games per state, that your analytic approach would not have been useful at all. Not in a posted comment.

          Just play a game with demonstrably better odds, just like million-dollar-prize scratch tickets, with scores of winners, annually in Massachusetts, NOT JUST ONE WINNER. And I showed that well with the MA-Lottery link.

          And to “elysianfield” whose comment was not addressed to me, I still stay stuck on point, AT ANY PRIZE-POT LEVEL, $1M, or $600M, this much is true, “You will NEVER WIN THE POT. So DO NOT PLAY, because you have what is effectively A ZERO PERCENT chance of winning.” (Regarding Power-Ball or whatever it is called. ) The prize level is completely irrelevant if you cannot win.

          People do not grasp that, and they rush out to buy, enriching state coffers, because the PRIZE THAT THEY WILL NOT WIN, has become huge. It does not matter how big a prize becomes — if you cannot win it.

          But the Massachusetts State Lottery Winners link shows that many many ordinary people, neighbors, do win the so-called “million dollar” prize. I still do not play nor do I recommend playing, but if you have money to lose, then play a smaller game, with better odds, and million-dollar-range prizes. ( Or whatever game can be demonstrated as having “better” odds. )

      • elysianfield says:

        I am sorry, but I don’t understand your answer…

        600 million to one is not zero.

        I am not trying to beat a dead horse…and I rarely gamble, but I do maintain that if any game of chance pays true odds, you are paid for your risk if you play and win.

  11. Alex says:

    Corrupt government. The Politicians are against regressive taxes yet that is exactly what the lottery and Indian casinos are. Every time I walk thru an Indian casino and look around most persons look poor. My probability theory mathematics teacher also had a sideline of setting odds for Vegas casinos. She (good looking polish chick) explained how casinos work and vary the odds so the house takes an average of 10%-15% from every dollar bet. She said if a casino tries to take 20% then business is hurt. If you took this class you would never gamble in Vegas!

    When I was growing up (late 70’s and early 80’s), gambling was frowned upon. There is not better evidence of bankrupt State than it promoting gambling. Might as well promote cocaine too!

  12. Paulo says:

    The article and posts assuredly true. I don’t buy lotto tickets here in BC. Although, I did belong to a work pool to avoid being the only guy who wouldn’t win…I think it was $10/month.

    Having said this, I do know I guy who won 33 million (tax free). He had to move away to parts unknown as his life was ruined. He would have total strangers asking for help to pay off their mortgage. “Come on, you’ve got lots”. True story.

  13. Tony Mike says:

    In the book 1984, Winston is walking near some proles reading a newspaper and he hopes they are looking to better their condition and perhaps deal with the corrupt government. As he moves closer, he overhears the proles talking about important matters…the lottery and sports. Some things never change.

  14. Malthus says:

    Isn’t it wonderful that governments actively promote a scheme to take a small amount of money off many people to make one person fabulously wealthy, not through hard work, or intellect but through blind luck.

  15. Finchey says:

    Just an FYI-I have many friends in Utah that cross the Wyoming or Idaho border to pay the tax.

    Of course, they may also get a “full strength” beer and fill the trunk up with cheaper spirits while they are playing.

  16. Bruce T. says:

    In Canada there are MANY different lotteries, all of course with promises of “fabulous wealth” and the concomitant lifestyle. Truth is that most of those who win $2 millions have to go back to work after two years because they have no idea how to handle money before or after!! At least there are no taxes on the winnings, and the money left over after prizes and admin. fees goes to sporting stuff for kids (and such like).

  17. Max Power says:

    Hey, if an adult wants to spend say a couple hundred bucks a year on lotto For Entertaintment Purposes Only I think that’s fine. But $763 a year for every man, woman and child? That’s just insane! What’s wrong with you Massachusetts??

    BTW, the eye-popping jackpots we’ve been seeing in recent years are the result of lotteries raising ticket prices and greatly decreasing the odds of winning the big prize. The lowered odds have caused the jackpots to roll over more often, leading to these crazy large jackpots.

  18. Jim Graham says:

    I WIN the lottery every day. I keep MY money in MY pocket.

    IF I could buy every possible combo of numbers on a lottery that would pay enough to double my money if I were to “win”, 20 other people would hit on the SINGLE tickets that each of them bought!!! LOL

    Paying the lottery is a special tax for people who cannot do math (most of US)

    “because it is fun, exciting, and even addictive.” It may be addictive but I can not see fun or excitement in dumping money in the lottery.

    • 91B20 1stCav (AUS) says:

      check and double-check. Franklin’s ‘…a penny saved (check an 18th-century’s penny’s worth today) is a penny earned…’ is still just as true today as it was then. But a free lunch for a perceived small investment is sooo enticing! (I’ve always figured playing the lottery only raises the already-greater chances of my being hit by lightning…). May we all have a better day.

      • Robert_D says:

        Any 18th century USA cent is a fabulous find. I am now a totally inactive USA collector, my dream was always to own a 1793 chain or 1793 wreath cent, out of reach for me, both of them. In my estimation, there are a dozen or so ultra-collectibles, 1955 double die, 1909s-VDB, 1916 25 cent S.L. Quarter, etc.

        I have an 1877 indian cent, 1916-d liberty dime and a 1795 flowing hair cent, all very nice, clean coins, but F-3 or G-4 at best. So much for a lifetime of collecting !

        Robert_D (now)

      • Vinman says:

        Franklin was right small amounts add up to big amounts over time . Some may say I am foolish but I still pick up those pennies from Heaven and whatever other change comes my way . Gives me some extra money for Christmas .

  19. WES says:

    I used to work in an engineering department and like most groups they particpated in the weekly Canadian 649 lottery. The job of collecting the money always fell to one of the Waterloo engineering co-op students. One new engineering student asked me if I wanted in as he walked by.

    I said to him “I win by not playing!” The student stopped dead in his tracks and then said to me “How can you win if you don’t play?” I then proceeded to explain that by putting the money towards my retirement savings I guaranteed that I would win!

    Being the clever fellow that he was he got it right away and we had a good laugh. Since he was seated in my pod we thereafter had many very interesting and entertaining discussions about money!

  20. David Calder says:

    All I’ve been reading is jealous people because I’m holding the wining Mega Million ticket. I just have to sign the back to be safe if I could just remember where I put that ticket.. It must be in the other coat pocket. Yup, that must be it..

    All joking aside, George Washington and Ben Franklin ran lotteries which was nothing new because ancient Greece and Rome had lotteries.

  21. MCH says:

    I am stupid, runs to the local convenience store to plunk down my two dollars for the impossible dream.

    Hey Wolf, if I win, I will invest in your site.

    • Vinman says:

      I am not sure why states with high populations wouldn’t want to make the odds better on winning there state lottery and keep the money in the state rather than pooling with the other states and sharing the revenue ????

  22. Gian says:

    Lotto winners are typically mythical beings from far away lands and almost fictional by nature. That is, until a person in your community who purchased his ticket at a store I used to drive by on a daily basis wins $200,000,000 and his son considered purchasing my house, which was on the market, via a cash transaction. Kinda makes the dream thing seem a little more real, even if not realistic.

  23. Maltese Falcon says:

    Only time I buy a lotto ticket is when it gets really high and someone at work starts an office pool. Would hate to be left out if they actually won.
    Alas in ten years of these pools, no joy…

    • Vinman says:

      Yeah I believe a lottery pool is the best way to increase your chances and besides theres more than enough money to go around if you win .

  24. DK says:

    I remember when CA had a vote for getting the lottery. And it was hard fought. The arguement was that it would create much needed additional funds for the school system. Whatever became of that?!

    A friend once said ” you can’t win, if you don’t play.” And I said ,”Statistically , you can’t win if you do play. The only difference being that you get to keep your money. “

  25. B Fast says:

    First, I find lotto-tax to be extremely sad, as it tends to tax the poor more than the rich. I think it’s because poor and mathematically challenged somewhat correlate.

    However, I do not understand the American fear of taxation that is implied. In Canada there is very little griping about being taxed. We see that we get services. Services cost money. Our taxes pay for it. No problem.

  26. Frederick says:

    I’m nearly 64 and have NEVER spent a red cent playing the lottery Maybe I should give it a shot for beginners luck Nah

  27. Felix_47 says:

    The money seems like chump change compared to the defense budget…seems our lawmakers and their K street Ivy League advisors don’t understand how to set priorities and budget either.

    • MD says:

      You mean the ATTACK budget…the route to wisdom is to call something by its true name, y’know.

  28. LittleNano says:

    Why should Indians have all the fun?

  29. MD says:

    Ah well it’s been a long time since countries that adopted the bankrupt(ing) ideology of neoliberalism have been able to support themselves via manufacturing and export – hence the turn to gambling and speculation which of course benefits ultimately the financier in the form of increasing personal debt.

    All is now usury – oh, and coffee shops. All poverty-stricken non-industrial countries have lots and lots of those.

  30. JohnnySacks says:

    When you’re paying $18.25 a day to the commuter rail to get to and from work, a $5 scratch ticket or two a week for some happy daydreaming – meh, so what. At least the money goes to supplement my state, provide a means of income for some state employees, and keeps the local convenience store casino afloat. But what’s the most insulting rub is the state then turning around and collecting tax on any winnings – sort of a double taxation scheme in the ‘stupidity tax’ meme.

  31. The lottery is gambling for people who don’t have the means (money to fly to Vegas), or even enough for a few hours at the Indian casino, or perhaps the race track. When the gambler wins everyone expects him to take them to dinner. The first thing most lottery winners do is help their friends. Gambling provides a social benefit, (as do taxes) and in that way the lottery appeals to the base culture.

  32. RD Blakeslee says:

    A lot of attention here, paid to benefits to government from lottery proceeds.

    But theere’s some for me, too and anybody else who doesn’t play: Rich and poor alike, they have some of “their” tax load borne by players (and smokers and drinkers, who pay high alcohol and tobacco taxes.

    The fact that they enjoy what they do also benefits me: They don’t get mad at me.

  33. Bruce Kowal says:

    A former economics professor once termed the lottery “A Tax on the Stupid”. Well said. Realistically, the lottery, in combination with alcohol and tobacco taxes are the only way to recoup the costs of aid to the “poor”. Public Housing, Medical Care, Drug Treatment, Prisons, Food Stamps — all the programs by which taxpayers pay money to non-taxpayers cost a lot of money. The poor pay no taxes; indeed if the can earn just enough to quality, they get Earned Income Credits. So, those shops which sell lottery tickets, smokes and alcohol, well, that’s how society gets some of that money back.

    A public policy question is this: should anyone receiving any public assistance be allowed to purchase a lottery ticket, or alcohol or tobacco? Easy way to verify the purchaser’s identity and electronically confirm with a database. Why should someone receiving a handful of benefits, paid by others, be allowed with his “extra” cash be allowed to purchase lottery, alcohol and/or tobacco. To my mind, if you receive public assistance because of your income, you should not be permitted to spend willy-nilly on foolish vices.

    • Wolf Richter says:

      The poor pay an amazingly large part of their income in taxes via sales taxes, property taxes (included in rent), SS, Medicare, all kinds of user fees, tolls, and the like. Given how little they make, in percentage terms, they pay far more than the wealthy that have all kinds of strategies and a rigged tax code to shelter their income.

  34. raxadian says:

    If I wanna trow money away there is charity and tips.

    Anyway for those guys and gals out there who wanna do a career in economics. Study math instead and get the needed courses as an extra. Oh and accounting too just to refresh the basics.

    Maybe history? History as seen by an economic viewpoint is fun because is full of facts instead of false theories. Unless is a very biased view of history of course.

    All you need is math.
    All you need is math.
    All you need is math, math.
    Math is all you need.

    All you need is math.
    All you need is math.
    All you need is math, math.
    Math is all you need.

  35. Vinman says:

    Why do states waste money advertising scratchers that usually have limited runs on TV ?

  36. Vinman says:

    Back in the 70’s when Lottery first started in our state they told us that the proceeds would go to our educational system . Than they saw how much money they were bringing in and decided to put the money in the General Fund instead were they could squander the money on anything they pleased . Too bad could only wonder how innovative our schools might have been had the money gone to education .

  37. Vinman says:

    I wonder if the Fed would ever nationalize Lotto to help pay off our $20 trillion dollar debt or to fund our infrastructure programs ?

  38. EcuadorExpat says:

    You Missed part of it Wolf. The $46 billion paid out to winners gets taxed again, if not by the states, then the federal government at the max rate.

    I am amazed that the lotteries are not sued for listing jackpots pretax. There is no way for anyone to get their hands on the amount listed as the jackpot.

    • EcuadorExpas says:

      And if they wanted an honest lottery, when someone does a quick pick instead of selecting the numbers, they would not issue a ticket for a set of numbers that had already been purchased.

    • Wolf Richter says:

      I mentioned the income tax on the jackpot. At the low end, I doubt that people who win $50 will add this to their tax return. But there may be gains in the $1,000+ range where tax-dodging is difficult or not possible — and you’re correct, I didn’t mention the mid-range of earnings that is being taxed :-]

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