Millennial Musing
July 24, 2018
The Lottery – a poor man’s tax

Wouldn’t you like to be rich instantaneously? Imagine buying a winning ticket for $1 and winning over $200,000 cash; wouldn’t that be grand? All you need is a small investment for a chance to be rich for the rest of your life. However, if you’ve read any of my columns before, you know I’m about to lift the wool from your eyes and ruin this fantasy.

Firstly, let me say that lotteries are not inherently bad. On the basic level, they are quite fair. Playing the lottery requires no skill and very little investment for a chance to win a large sum of money. Commonly, the proceeds from lotteries are used by governments as revenue and the winnings are taxed by the state (which I find very unfair, but I digress). However, the observation of lottery ticket consumption shows how they disproportionately affect poor people negatively.

There are several alarming trends studies have found surrounding lotteries. Firstly, lottery tickets sell more when unemployment is high. When you think about it, this makes sense. Unemployed people are often down on their luck and would gravitate towards the idea of a quick pay-out. Unemployment can make you desperate for a break and the idea of a quick cash grab is a major incentive for playing. Secondly, more poor people buy lottery tickets than rich people. This one is particularly harmful, as people can spend hundreds of dollars buying lottery tickets. Moreover, the likelihood of a pay-out is miniscule. A person is better off simply saving their money or investing, versus playing the lottery.

Lotteries prey on the economically vulnerable members of society and their desire to improve their standard of living. It is easy to judge the players as naïve or stupid; why would you spend money you can’t afford?

An even harsher truth was identified in a 2006 study. They found that lottery winners were no happier than those who did not win and found less joy in everyday activities. I suppose whoever said money won’t buy happiness was on to something. Finally, they found that lottery winners lack financial literacy and often lose all their earnings within a decade. So even when they’ve won the money, it seems they don’t know how to spend it. Financial literacy is often overlooked in school, as it is something you learn from your parents. If your parents aren’t financially literate, then that ignorance is passed on to you. It is very easy to exploit someone when they are financially ignorant.

If I’ve learnt anything on this earth, it’s that humans are hopelessly optimistic. I can preach until I’m weak about the evils of lotteries and yet I strongly believe everyone would ignore me and play anyway. I suppose playing the lottery is a lot like drinking alcohol. You know it’s bad for you, but it feels good while you’re doing it; you just tell yourself “I’ll deal with the consequences later”.