In a country that is increasingly defined politically by its aversion to taxation, state lotteries are re-emerging as a way for states to raise money without enraging their voters. And despite their relative modest share of state budgets, these games have become big business for the companies that design and operate them.
In its early days, the official lottery was a “budgetary miracle,” writes Cohen: For politicians grappling with deficits that couldn’t be addressed by raising taxes, it offered a way to maintain state services without infuriating their constituents. But crooked operators quickly spoiled the party. By 1860, all but one state had banned lotteries—the notorious Louisiana State Lottery Company—and Congress finally killed it off in 1890 with a law that prohibited interstate lottery advertising and sales.
Lottery advocates sometimes argue that it’s not fair to criticize state lotteries because the players are just buying into a scam. But this argument is flawed in several ways, most notably that it ignores the fact that the odds of winning are extraordinarily low and that, like all commercial products, lottery advertisements tend to be marketed in communities that are disproportionately poor and Black or Latino. As a result, these communities are effectively paying into the lottery system that they don’t benefit from, while white and upper-class families reap the benefits of their investments. This is what economists call regressive taxation. And it’s not a good thing.