Lotteries as a Source of Revenue

Abstract

Lotteries run by states² around the world are typically characterised by two features. The first is a high tax rate. While a lottery is not itself a tax, as it is sometimes called, the fact is that almost all of the take-out rate (the price of a ticket minus the expected value of the prize) goes as revenue to the government.³ For most lotteries, the tax rate is above that for other forms of gambling and higher, even, than ‘sin’ taxes on alcohol and tobacco. The second feature is that most states formally hypothecate lottery revenue to one or a number of ‘good causes’. These range from very narrow purposes, such as a specific sports stadium, to wider designated good causes, commonly including sports, arts, heritage and charities.

sarah.smith@bristol.ac.uk