Pie in the Sky: The Jackpot Illusion

More than 100 billion dollars will be spent on lottery tickets this year. That’s more than what’s spent on movies, video games, music, books, and sports teams combined. People are desperate, and the lottery feels like an easy way out. But behind that colossal jackpot lurks a depressing truth; this is a predatory game, one where the odds are stacked in favor of our government and at the foremost expense of low-income and minority communities. Meanwhile, millions of Americans “scratch off” any chance of upward mobility for that ever-elusive shot at the grand prize. Others complacently watch as these communities get their wealth siphoned away over a false hope. The winners are few and far between.

Everyone has considered it at some point — what they would do with the money should they win someday. For most it’s a harmless fantasy, but for people stuck in a cycle of poverty, it can be easy to start to think it’s your only opportunity for a life of financial security. A study conducted by the Howard Center for Investigative Journalism found that the most frequent lottery players consist primarily of African Americans, low-income communities, and high school dropouts. The study also found that communities with higher rates of poverty are more likely to contain lottery retailers. In 41 states, the areas with lottery retailers have lower median household incomes than those without. In other words, lottery vendors are systematically placed in communities with very little excess capital, where the people are most desperate, and the options are most limited. This is a serious issue, especially when households earning less than $13,000 a year spend an average of 3% of their incomes on the lotto. Meanwhile, 22% of Americans have no access to an emergency fund according to Bankrate, many of which are likely the same folks who spend large percentages of their income on the lottery. They could be saving this money or paying off bills and debt. Instead, they’re casting their last minnows out as bait into a lake without fish. And who could blame them?

So where does this money go? According to the Tax Foundation, only about 60% of the revenue from state lotteries goes back to winners, which are significantly worse odds than even your average casino slot machine. Of this 60%, much of it is taxed away by the government. Of the remaining 40%, some will go to administrative expenses: printing the tickets and paying for salaries and advertisements. Another piece of the pie goes to retailers, which are often large corporations such as QuikTrip and Circle K. The excess goes to beneficiaries, and for the Missouri Lottery the sole beneficiary is education. According to MoLottery, the lotto proceeds make up 3-4% of the funding for education in the state of Missouri. We are decimating many of our fellow citizens’ financial prospects for a measly 3-4% of public education funding. Could we not find a means of garnering this extra 4% without targeting our poorest and most vulnerable people, exploiting their desperation and necessity for any chance at a way out? It is also important to note that the proceeds are not necessarily funneled back into the communities where the tickets were purchased — some of the money spent in North St. Louis will inevitably make its way to a Ladue school, for example, or to fund universities that many lower-income people simply can’t afford to attend.

It’s time we start asking ourselves the ethical questions. Is the lottery exploitative? Does it reinforce unnecessary income inequality? Is there a means to reap the benefits without causing so much harm? Should we be advertising these tickets with flashy designs and bubbly text, and with television commercials? Do we adequately educate players on their chances of profiting? There’s a good chance that some of the answers aren’t pretty, and that means it might be worth considering reform. 

The issue is quite clear, but the solution is less so. Banning lotteries seems excessive and would likely spark outrage. Many would see it as a restriction on personal liberties, and others would argue that this opens the door for non-regulated lotteries to fill the market niche which might further disadvantage low-socioeconomic status communities. What seems more reasonable, though maybe less intuitive, is a form of Pigouvian tax. A lottery tax would raise the price of tickets; all else being equal, people would likely spend less money on the lotto. Additionally, the revenue generated by this tax could be funneled directly into low-socioeconomic status communities that are most disadvantaged by the industry. A similar effect could result from reallocating parts of the winning fund to low-income communities instead. Either way, disincentivizing lottery play and redirecting revenues to the most affected areas seems like the “best bet” moving forward.

Josef Westberg ‘27 studies in the College of Arts & Sciences. He can be reached at j.r.westberg@wustl.edu