Here’s How State Governments Rip Off Poor People

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Gambling is a textbook example of a zero sum game – where one cannot be made better off without one being made worse off.

Lotteries are a form of gambling worse than a zero sum game – it’s a net loss game. Only a portion of the money spent per ticket actually goes into the pot (the rest to the State), and any money that’s won is taxed. It’s hardly an investment, as in the long run, unless your one of the lucky few, you’re guaranteed to lose money.

Here’s a breakdown of what I mean:

Lottery-Chart

The lottery has often been described as a “tax on the poor,” because the poor spend a disproportionate amount of their income on lottery tickets. Below is charted the aggregate amount spent on lottery tickets in 2014, and a State by State breakdown of spending on the lottery:

What Americans spent on the lotto in 2014

So how much of that $70.1 billion in spending is burdening the poor? Those in the bottom 20% of the income distribution. make up 60% of those who play the lottery. With that fact known, we get a figure of $1,010 in lottery spending per household in the bottom 20%.

The Lotto as a Tax on Poor Families

To quote from Max Galka (who is also the source of the above charts):

Based on these assumptions, the “lottery tax” is the single biggest tax paid by low income households.

Even if you take the conservative assumption that lotto sales are equal across income groups, that still comes out to $566 spent on the lottery per household.

In other words, you only have to assume low-income households spend slightly (32%) more than the average, and the lotto becomes bigger than any single tax they pay.

I sure wish the largest tax that I paid was voluntary…


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Analytical Economist

About Analytical Economist

The Analytical Economist is a freelance financial, political, and economics writer. His work has appeared in a variety of publications, including National Review, the Foundation for Economic Education, Ludwig von Mises Institute, among many others.

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