The staggering $2.04 billion lottery jackpot sold in Los Angeles County made headlines this week, with the ticket holder now holding the title of first lottery billionaire. 11.2 million additional ticket holders across the country also won cash prizes of various amounts. The seller of the winning ticket, 75-year-old Joseph Chahayed, told media that he would split the money among 11 grandkids. The New York Times reports that California public schools will receive $156 million in funds as a result of this big lottery win.
While we don’t know personal details about the $2 billion jackpot winner, most media coverage of the Powerball comes across as a feel-good story that encourages regular people to dream of joining the billionaires like Elon Musk and Mark Zuckerberg who dominate our news cycle (and our political system).
However, the recent media frenzy over the Powerball has done little to expose the predatory quality of lottery companies or the ways in which lotteries effectively function as regressive taxes.
In a political era in which taxes are seen as antithetical to freedom, and billionaires such as the Musks and Bezoses of the world often pay little to no taxes, the funding of socially beneficial public goods already falls disproportionately on the middle and working classes. We know that as a percentage of income, working Americans pay a far greater percentage of their income to state, local and federal taxes compared to the wealthiest Americans. However, the purchase of lottery tickets is overrepresented in lower-income Americans, and those Americans who feel economically insecure. While the majority of lottery tickets are purchased by middle-income Americans, the lowest income quintile of Americans tend to have the highest rate of lottery ticket purchases, and with a greater number of days played.
This is no accident, but rather the conscious marketing decisions of predatory lottery companies, who purposely market aggressively in lower-income communities and communities of color. The impressive potential payout of the lottery, coupled with the relatively low cost of buying a single ticket, can lead to addictive behaviors that can be extremely destructive to already distressed individuals.
In addition, as lottery revenue goes toward education funding, oftentimes the benefits are unequally distributed. For example, in some states, lottery funds go to wealthier school districts and higher education institutions, which tend not to benefit the most frequent lottery players. In addition, some states have merely cut their state allocations to funding education, replacing it with lottery revenues, such as in North Carolina. But most of the time, lottery taxes merely go into a state’s general fund, with little oversight on how these funds get used. Thus, states engage in austerity, allowing lower-income lottery players to fund public services that should be funded from a progressive tax.
A recent Bloomberg article declared that the ballooning of the lottery industry represented a failure of state governments. State governments largely own the major lottery organizations, and thus benefit from retreating from the difficult politics of funding the needs of their people. Lotteries serve as a convenient escape from government’s problem of taxation with representation at a time when political leaders refuse to take on the capitalist class.
While the state lottery associations do not necessarily have independent political affects, private businesses that sell lottery tickets do benefit from their sales and have thus played an outsized role in protecting the lottery industry.
According to Jonathan Cohen, author of For a Dollar and a Dream: State Lotteries in Modern America, 7-Eleven, the convenience store chain, funded the passage of the 1980 Virginia Lottery Act. Retailers, through industry organizations, continue to push for a greater share of lottery commissions. The New York Association of Convenience Stores has recently pushed for larger commissions, citing increased costs of operations. Cohen also notes that “The $2 billion jackpot of course makes headlines, but isn’t the real problem when it comes to state lotteries and their effect on the poor.” He notes that the larger, regular sale of scratch and smaller jackpot type games disproportionately affect “lower income, nonwhite, and less educated” Americans, and this rarely gets the attention it deserves.
The third reason that we should be concerned about the rise and influence of the mega lottery companies is the broader political effect that lotteries play on our political psychology. The promise of a relatively easy payout creates a mirage of future economic stability and prosperity. While most lottery players know that they will not reasonably win a big payout, the lottery and its perpetuation as a means to reach the American dream contributes to the anti-social idea that indignities and lack of social protections under capitalism can best be addressed by accumulating riches. According to polling, 6 out of 10 Americans plan to be “very wealthy” someday, even though they dislike billionaires and income inequality.
According to a recent poll, more people would rather have extreme wealth than the old “American Dream” of a white picket fence. More than half of Millennials think they will be millionaires someday, even though the data suggest otherwise. In fact, most young people face a reduced chance of economic prosperity than their parents’ generation enjoyed.
Scholars know that economic inequality is a social negative that affects many components of our increasingly fragile democracy. According to various studies, economic inequality creates or maintains greater political polarization, anxiety about status and lower levels of trust — all factors that worsen democracy. Economic inequality leads to clear political and social problems that can have negative effects on individual-level perceptions and beliefs about the government and democracy. Lotteries, which are an individualistic solution to the social problems of inequality and precarity, shift the focus from the political responsibility of governance to the luck of the ticket buyer.
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