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The first state-run lottery was approved in 1964. At the time, states were faced with declining tax revenues and a reluctance to raise taxes. Lotteries offered an alternative source of revenue without the stigma of a tax increase. As Cohen writes, they were “budgetary miracles.” They allowed politicians to maintain existing services—such as education, roads, and canals—without worrying about being punished at the polls.
In the late twentieth century, when America was gripped by a tax revolt, the lure of the lottery was even more potent. Lottery advertising boasted that its proceeds would “help pay for everything from a new bridge to a school.” But, as with all commercial products, the lottery is responsive to economic fluctuations. As incomes fall and unemployment rise, sales tend to grow. It is also heavily promoted in neighborhoods that are disproportionately poor, Black, or Latino.
In addition, many lottery ads inflated the impact of the money on state budgets. They claimed that, for example, California’s initial lottery revenue covered five per cent of the state’s K-12 education budget. In fact, however, lottery funds accounted for only about one per cent.