Should the Government Set Up a National Lottery?

BY busadmin  July 24, 2009 at 3:32 PM EST

lottery ticket; skibler via Flickr

Question: No one wants to pay higher taxes. But at the same time, many people don’t think twice about spending a few dollars a week on a lottery ticket. Why doesn’t the government set up a National Lottery to supplement its income? Wouldn’t it be better to have people freely give up their money than to have it forcibly taken from them?

Paul Solman: This is the classic (some would call it “libertarian”) argument for government lotteries: taxation as “free choice.” But since gambling seems to be as physiologically addictive as many dependence-inducing drugs (Gambler’s Anonymous, anyone?), I wonder if a national lottery wouldn’t be somewhat similar to creating a national monopoly on heroin and cocaine and having the government sell them to raise money.

I’m being a wise-acre here, but the point isn’t facetious. Moreover, since the data I’ve seen say that the less-well-off are disproportionate buyers of lottery tickets, for perhaps quite understandable reasons (how else can they rise dramatically in wealth?), a lottery promises to function as a regressive tax.

On the other hand, national lotteries have a long, if inglorious, past. My favorite account comes from a truly superb book of intellectual history, Jerry Z. Muller’s Mind and the Market. It concerns lotteries and the French Enlightenment giant, Voltaire:

Voltaire made his fortune through the [lottery]. In their desperation to raise money to cover public debt, 18th century governments frequently resorted to lotteries.” France ran one in 1728 in which the prize pool was larger than what it would cost to buy up all possible winning numbers, like a lottery which builds to a huge amount today.

Voltaire collaborated with…a noted mathematician to calculate the resources required to purchase all the tickets…cornered all the tickets for a given drawing and split the prize money.

There are lottery syndicates operating today. To the extent that cleverness correlates with high income, that would make a national lottery system an even more regressive tax. If vulnerability to gambling addiction also correlates – inversely – it would be more regressive still.

Voltaire, BTW, argued that lotteries were a tax on the poor.