Are Lotteries Taxation Of The Poor?

Estimated reading time: 3 minutes

easy moneyIt is a well known fact that the odds of winning the lottery are against you. Working out the odds of your ticket being the winning ticket against the cost of a ticket and the potential earnings, it does not take a mathematical genius to figure out you’re not getting the better end of the deal. Things wouldn’t be as bad if you were to simply purchase one ticket in your lifetime, but most people purchase lottery tickets every single week and these costs pile up over time.

People who buy lottery tickets are not fooled into thinking the odds are better than they are — they know you are orders of magnitude more likely to die in a car wreck on your way to buy the ticket than it is to win the lottery. But they are fooled into thinking that this extreme moon-shot of a chance is worth the investment of what little money they have.

Why add the “little” qualifier before “money”? See, the situation gets worse when you realize that it’s the poorer, unemployed and uneducated people that are the ones standing in line to buy these lottery tickets. The desperate situation they find themselves in makes the dream of winning millions of dollars seem worth the investment (spoiler alert: it isn’t). Rich people don’t purchase lottery tickets. They understand the odds and they understand that this is exactly how one loses all their money: one bad micro-investment at a time. They understand that if they were to take the money spent on lottery tickets and invest it wisely, it would statistically return a lot more money than the lottery.

It is the poor who are queuing and, incidentally, it’s the poor who stand to lose the most. They are being fed false hope, plain and simple. They are giving money to the government, money they do not have, in the misguided belief that it is worth the investment. The idea of their life taking a 180 overnight blinds them to the cold truth of their situation.

Over the years, many studies were carried out to analyze exactly how lottery sales are skewed towards poor people (in the US). Here’s a few of the conclusions from those studies:

  • North Carolina Policy Watch found that $200.11 were spent per capita (per man, woman and child) on lottery sales in North Carolina, in 2009-2010 fiscal year. That’s enough to get you thinking (considering 14.6% of residents live below the poverty line) but it’s far more interesting that eighteen of the twenty most impoverished counties in the state had per capita sales higher than the state average. Similarly, on the West Side of Chicago, the two counties with the highest unemployment rates (Bellwood and Maywood) generated the highest per capita sales.
  • Meanwhile, in South Carolina (2009), 28% of households earned less than $40,000. These same households made up more than 54% of lottery players.
  • And if you’re wondering why this is, how about this survey from 2004 concluding that poor people are 25% more likely to play for money (as opposed to entertainment) compared to the national average. They look at it as a get-rich-quick scheme and, just like get-rich-quick schemes, it’s barely more than a scam (except this one’s perpetrated by the government).

Dave Ramsey, financial author and motivational speaker, calls lotteries “Stupid Tax” and I find it harder to disagree with him the longer I think about the situation. The reasoning is simple: the rougher your financial situation is, the harder you need to be on yourself to manage your own money. His solution is even simpler:

Working hard and saving money is the only surefire way to make money. It works every time unlike the lotto.
– Dave Ramsey (How the Lottery Can Ruin Your Life)

Amante Reale

I'm a freelance writer specializing in tech, gadgets, security, cryptography and cryptocurrency. Warning: I am armed with very strong opinions and I'm not afraid to use them. Hire me!