With the nation abuzz from this weekend’s announcement of the record Powerball lottery purse, many naysayers have come out of the woodwork to criticize the nation’s most successful and trendy form of revenue generation.
Some dismiss the drawing as a frivolous waste of money. Given the insurmountable odds, some ventured as far as to say there is a greater chance of the Bulls winning a football game than someone collecting the winnings.
In a mad dash to label the “lottery gold rush” as just another example of Black Friday-type consumerism, critics have undermined a critical component of the lottery and how it contributes to American society.
The lottery can be thought of as an “incentive-driven tax” on consumer demand. Consider this: The government has several ways to raise revenue for its expenditures, the most implicit of which is through taxes. Another form of revenue generation is through services or fines, such as the issuance of government permits or citations. Neither of the two methods have as much appeal as the lottery, a system financed by tax funds designed to elicit interest in generating more revenue by offering an incentive – in this case, a glimmer of hope to become the next mega-millionaire.
The chances are slim. So slim, in fact, that the Powerball lottery estimates a total revenue in excess of $5 billion simply from giving U.S. citizens a chance to win $500 million, according to the Huffington Post. As casino junkies like to say, “the house always wins”, and the Powerball lotto is no exception.
But where does all this money go? Is it simply swallowed by the money-hungry, well-greased machine we’ve come to know cordially as the U.S. government? Quite the contrary. After doling out the earnings and levying the proper federal income tax, states implementing the Powerball lottery, or any statewide lottery, have direct access to the funds at their disposal.
Most states make use of the funds to benefit social programs. According to the Florida Lottery’s 2010-11 report, 30 percent of lottery sales – or $1.192 million for those years – goes to education funding, and 90 percent of the Education Enhancement Trust Fund allocations come from lottery proceeds. About a quarter of that revenue, $338 million, financed the Bright Futures Scholarship Program, which benefits accomplished high school students by subsidizing their college education.
Though the Bright Futures Program has come under dire financial constraints in recent years, primarily as a result of ballooning tuition costs, hundreds of thousands of students have benefited from its implementation, and transitively the existence of the Florida lottery.
The vices associated with the “morally reprehensible” act of gambling are outweighed by the benefits of administrating state and nationwide lottery systems to generate government revenue for social programs. In a time of economic decline, our cash-strapped government should advocate programs that fund state services while providing a small, yet plausible incentive to the consumer.
Konstantin Ravvin is a senior majoring in biomedical sciences.