$2B Jackpot Reminds Me: The Lottery is a Scam and Should Be Abolished
In New York, lotteries have a good reputation because proceeds are given to the Department of Education, as per NY State Constitution.
In 2021, New Yorkers bought $10.4 billion worth of lottery tickets and won $2.4 billion in after-tax prizes.⁵
Check my math, but N.Y. lottery players lost $8 billion of value in 2021. How much of this loss went to the NY Department of Education? $3.6 billion.
Where did the other $4.4 billion go?
$2.4 billion: Income taxes collected from lottery prizes. New York law withholds tax from the prize at the highest effective rate if the prize is greater than $5,000, but over 90% of prizes qualify (even scratch-offs)
$2 billion: Bodega commissions, gaming contractor fees, marketing, investing, and other overhead, gross of income tax
What a crappy deal! New Yorkers spent $8 billion to:
- Pay $6 billion in extra taxes
- Pay $2 billion more to keep the racket going
And of course, those that buy lottery tickets are not the wealthiest among us. According to the Journal of Gambling Studies, “The poor are still the leading patron of the lottery.”³ Lottery players are most frequent in the the poorest, most disadvantaged neighborhoods.² High school dropouts spent four times more per year on the lottery than college graduates,¹ and a study published in the National Library of Medicine states, “Those in the lowest fifth in terms of socioeconomic status had the highest rate of lottery gambling (61%) and the highest mean level of days gambled in the past year (26.1 days).”⁴
If New York wants an extra $3.6 billion for education, then tax the full amount and we will all save $4.4 billion in a progressive manner that doesn’t syphon value from our most vulnerable populations.
“Jesse, don’t baby us. Folks know the risks and potential rewards, if they want to play let them play.”
Not when the state is knowingly swindling the poor by selling fake dreams of overnight riches. It’s predatory. If people want to gamble they can go to a casino like the rest of us.
“Isn’t that the same thing?”
No. States take advantage of their monopoly on the lottery. Federal law generally prohibits private companies from operating lotteries.
If a private casino offered such an outlandishly unwinnable game and generated profit, another casino would offer a similar game with slightly better winning odds to attract customers and steal some of the profit until all casinos offered a reasonable game that was still marginally profitable for the business. The odds of winning in blackjack are 42%. Odds of winning the Powerball are 1 in 292 million, also known as 0.
In 2021, Americans spent over $100 billion on lottery tickets. What a waste.
Citations
2. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4103646/
3. https://link.springer.com/article/10.1007/s10899-010-9194-0?LI=true
