Powerball Lottery

Where Powerball is most popular, via Vox

What's happening?

On Wednesday, three lucky winners claimed the world’s biggest lottery jackpot—$1.5 billion. They won it from Powerball, a lottery offered by 44 states and run by the Multi-State Lottery Association.

 

No other lottery has ever broken $1 billion. This round was the result of rule changes this past October that made it easier to win small jackpots but decreased the odds of winning the jackpot from 1 in 175 million to 1 in 292 million. Because no one won, this lottery rolled over every week from November 7th-January 13th.

 

The rule changes and this enormous jackpot are themselves the product of declining lottery sales nationally—down 19% last year. In New York, sales dove 44%.  

Why is it important?

Despite declining sales, the lottery remains stunningly popular. Lottery sales totaled $68 billion in 2013—more than Americans spent on movie tickets, music, porn, the NFL, major league baseball, and video games combined

 

People place their hopes in Powerball, particularly at a time income levels are stagnant: 1 in 5 Americans believe winning the lottery is the only way they can accumulate substantial savings.

 

States rake in huge amounts of money from the lottery. Take New York for example: The lottery brought in $9.2 billion in 2014, and the state used 60 percent of the money for winners, 30 percent for education, and the rest for operating expenses and commissions. Many states promote the idea that the lottery helps to fund education.

 

However, the lottery remains controversial for several reasons—as we'll see. 

Debate it!

Should states operate lotteries like Powerball?

Against: 

The lottery's claims of funding education are misleading. Instead, lotteries move that burden from existing state taxes to predominantly low-income and minority communities. At the same time, they prey on the hope of these communities to better their lives—with something less likely to happen than being struck by an asteroid

 

Though 24 states dedicate lottery funds to education, the percentage of state spending on education is down or flat in 21 of these states. In other words, states factor the lottery into their funding decisions and actually put less money towards education from their general funds.

 

In theory, this might mean more money total to spend on other state programs. In practice, it often means lowering corporate taxes which—since lottery tickets are primarily bought in low income, minority neighborhoods—means moving the tax burden to these communities instead.

 

Further, lower income households spend a significantly higher percentage of their income on lottery tickets. Many feel the lottery is the only hope for future savings.

 

Particularly given that the likelihood of winning the lottery is so infinitesimal, states should not operate prey on the hope of their most vulnerable communities based on false ideas about funding education.

 

For:

The lottery brings in a much needed source of state funding that is simply unequaled by other means. It is by definition an opt-in system—with a fantastic potential payoff—that supports vital state programs like education.

 

The 44 states that operate lotteries require that funding to support necessary programs. That support is enormous: In New York, the state put $3.1 billion to various state initiatives. Florida funneled $1.4 billion to state programs. In California it was $1.3 billion, in Massachusetts, $971 million.

 

While it is true that those who participate in the lottery are disproportionately low-income, buying tickets is purely voluntary. The fact that lottery ticket sales increase when wages are stagnating is not a sign that states should stop operating the lottery. Rather, it is a reason states must focus on alleviating the real issues facing their low-income communities with programs to address the wage stagnation and lack of economic mobility that is the root of the problem.

 

In short, the lottery is a necessary initiative that states operate not only as a chance for someone to get rich quick but also as an important source of funding. The amount it brings in cannot realistically be replicated elsewhere. Any burden it places on low-income communities should address the issues at the heart of that problem: economic mobility itself.

 

Learn more...

  1. The New York Times' Q&A on Powerball
  2. John Oliver's bit on the less flattering side of the lottery
  3. The State and Local Government Review's research on lotteries and education
  4. Vox's interactive data on lottery ticket purchases