Lotteries are one of the oldest forms of public taxation. In the fourteenth century, they were popular in the Low Countries, where profits helped to build towns’ fortifications. In England, lotteries were used for a variety of purposes, including collecting voluntary taxes, financing colleges, and helping to pay war veterans.
In the early twentieth century, when states started holding official lotteries, advocates promoted them as an alternative to rising state taxes. They argued that lottery proceeds would cover a single line item, typically education but sometimes elder care or even a public park. As a result, legalization advocates “wildly inflated the benefits of a lottery,” Cohen writes.
Since that time, lottery proponents have moved away from that message. Instead, they have largely emphasized two messages — that the money they raise for states is good and that playing the lottery is fun. Both of those messages obscure the regressivity of lottery play. The vast majority of lottery players are in the 21st through 60th percentiles of income distribution — people who can afford to spend a large chunk of their discretionary budget on tickets.
In addition, they are the audience for lottery ads that tout how easy it is to win. As a result, lotteries have become an increasingly important source of state revenue. Unlike most commercial businesses, however, lottery revenue is highly responsive to economic fluctuations. The sales of lotteries and related products increase when unemployment rises or poverty rates grow, and they are heavily promoted in communities that are disproportionately poor or black.