Yahoo News 360: Does the Lottery Do More Harm Than Good?

From Yahoo News 360:

What’s happening

A winning Powerball ticket worth a record-setting $2.04 billion was purchased in Altadena, Calif., lottery officials announced last week. The jackpot grew to such a staggering amount — more than $400 million higher than the previous record — over the course of several months after 40 straight drawings were held without a winning ticket. The winner, who has yet to be named, will have the option of choosing to receive the full $2 billion in the form of annuity paid annually over 29 years or as a lump sum valued at just under $1 billion. Either way, they’ll have to pay an enormous tax bill on the winnings. The likelihood of any one ticket winning the Powerball is estimated to be about 1 in 292 million. But those long odds don’t stop Americans in the 45 states that participate in the lottery from spending huge sums of money in hopes of striking it rich. In 2019, for example, more than $83 billion was spent on lottery tickets across the U.S., according to the association that represents state lottery organizations. A hefty share of that money goes towards prizes, while some of it is used to fund the operations to run the lottery. Each state also allocates a portion of its lottery revenue for government spending projects. In many states, the money goes primarily to education. But it’s also used to fund support for senior citizens, environmental protection, construction projects and to bolster state budgets. Lotteries have existed in America since the first colonies, as has the controversy surrounding them. In fact, they were banned in all but a handful of states in the mid-1800s over concerns about corruption, and there were no legally operating lotteries in the U.S. for the entire first half of the 20th century.

Why there’s debate

The modern version of the lottery is the source of heated debate as well, with many experts arguing they do more harm than good. Proponents of the lottery say it benefits far more people than the individuals lucky enough to have a winning ticket. They argue that lottery proceeds allow states to support critical public programs that strengthen entire communities without having to raise taxes. California’s lottery, for example, has given more than $39 billion to public schools since it launched in 1985. Others make the case that lotteries are harmless fun, giving players a chance to fantasize about what they might do with their riches even though they understand the odds of winning are essentially zero. That experience alone, they say, is well worth the cost of a ticket. But critics of the lottery, many of whom want to see it eliminated, often argue that it functions as a tax on the poor because of research that shows low-income Americans tend to play more and spend a larger share of their income on tickets than other groups. Others argue that lotteries prey upon the desperation of people who have been failed by a system that has given them few real opportunities for economic mobility. There’s also a lot of skepticism about the good that lottery funds do for the public. Research suggests that education funds from lotteries often go to schools in wealthy or middle-class neighborhoods rather than to poorer communities that contribute a disproportionate amount to lottery revenue. There’s also evidence that lawmakers frequently use lottery funds to cover for spending cuts, which means that the budgets for things like education and environmental projects don’t actually get any larger.

What’s next

Despite these objections, lotteries are still very popular with the American public. There have been some recent efforts to expand the lottery to the five states that currently don’t allow it — Alaska, Hawaii, Alabama, Utah and Nevada — but local political opposition has stood in the way so far.

Perspectives

Supporters

The fun of playing is its own reward “For the average buyer, the obvious foolishness of hoping for a 1 in 300 million win is balanced by the ‘psychic income’ that you get with your $2. What is psychic income? Merriam-Webster defines it as: ‘Rewards (as in prestige, leisure, or pleasant surroundings) not measurable in terms of money or goods.’ … In the case of a lottery ticket, the psychic income comes in the form of two or three days of richly rewarding fantasies.” — Jeff Greenfield, Politico Since people will gamble anyways, it’s better if it happens in state-sanctioned lotteries “The impulse to gamble appears to be hardwired in the human brain. … If people are determined to sink their money into the addictive jolt of gambling, isn’t it better that governments run the games and skim the profits, rather than, say, organized crime?” — David Von Drehle, Washington Post There’s nothing unseemly about funding government projects through the lottery “Governments have long imposed sin taxes on vices in an effort to raise revenue, with the added justification that the resulting increase in the costs of such activities may discourage them. And while gambling can turn into a socially harmful addiction, its ill effects are nowhere near as costly in the aggregate as those of alcohol or tobacco, two other vices governments use to raise revenue.” — Lewis R. Humphries, Investopedia The lottery is harmless relative to some of the other financial schemes the U.S. allows “Is it a mistake to play the Powerball? In the grand scheme of things, it’s a lot less harmful than many other self-destructive things that people living on the edge often do, like running up credit card debt, exceeding their bank overdraft limit or taking out loans from payday lenders. If you don’t buy too many tickets, and it gives you some pleasure, it seems fairly harmless.” — George Loewenstein, CNN

Critics

Education budgets don’t actually get any bigger because of the lottery “Although states typically claim that lottery revenue will be dedicated to education, money is fungible: Such income can simply act as a substitute for general revenue that’s used to plug holes elsewhere — in pension plans, for instance. A significant amount of evidence suggests the benefits for education are usually either small or illusory.” — Editorial, Bloomberg Read more at Yahoo News 360.