Lottery Taxes

The casting of lots for material gain has a long record in human history—indeed, it is recorded several times in the Bible. But modern lotteries have a more sinister purpose, one that violates God’s command against coveting the possessions of others (Exodus 20:17; 1 Timothy 6:8). These lotteries dangle the promise of instant riches in an age of inequality and limited social mobility. They appeal to an inextricable part of the human drive to gamble, a tendency that may be as strong in lower-income people as in those with more wealth.

Lotteries are run by businesses whose bottom line is profits. As such, they rely on two messages to maximize revenues: the first is that the experience of playing is fun. The second message is that the money won in a lottery benefits some specific public good, such as education. This message has broad popular support, even during periods when a state government is under fiscal stress.

However, the money won in a lottery doesn’t sit in a vault, ready to be handed to winners. It is calculated based on how much the prize pool would yield if it were invested in an annuity for 30 years, with a first payment when you win and 29 annual payments that increase by 5%. Thus, it is actually a type of tax—one that takes money from people who might have saved it for something else. It’s a form of “taxation without representation,” a distortion of the principle that voters should choose how their taxes should be spent.