Official Lottery

Official Lottery is a fascinating book that examines how state governments began to sell essentially illegal gambling in the form of numbers games. The book’s main theme is how, in the nineteen-sixties, growing awareness of all the money to be made in the lottery business collided with a financial crisis that put state governments in an impossible position. Many states provided a generous social safety net and, in addition to paying for wars and other costs, were burdened with inflation, population growth, and a fading economic boom that made it nearly impossible to balance the books without raising taxes or cutting services.

The result of these forces was that lotteries became a new source of revenue for the government, and they were extraordinarily effective at attracting public attention. But Cohen argues that these campaigns were fundamentally misleading, because they wildly inflated the impact of lottery proceeds on state budgets. In reality, the revenue generated by a lottery is far smaller than what it was pitched to voters.

For example, the New York Lottery was launched in 1967 and promised to use the proceeds for education. But the money has only covered about five percent of the state’s K-12 budget each year since then, because the lottery has to pay for all its expenses. It also pays its retailers and withholds federal, state, and local income taxes from prize winners—who can choose to receive their winnings in payments over 29 years or as a lump sum.