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The Lottery As a Form of Taxation in America

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Lottery is a huge business, with Americans spending upwards of $100 billion on tickets each year. States promote it as a way to raise revenue for public services, and indeed it is an important source of money for many state budgets. But it is a very expensive way to do so, and there are serious questions about how much good the money really does.

In his new book, “The Lottery,” David Cohen writes about the evolution of lottery as a form of taxation in America. While he gives some nods to its early history, he focuses chiefly on the modern incarnation, which began in the late twentieth century when states struggled to balance budgets without enraging an increasingly anti-tax electorate.

A lottery is a game in which numbers are drawn at random to determine the winner of a prize. The prizes vary widely, but are normally cash or goods. The chances of winning depend on the frequency of the drawing, and the prizes are typically subsidized by a percentage of ticket sales. In the United States, there are a number of different types of lotteries, including state-run, multistate, and private lotteries. Each of these has its own rules and regulations.

Lotteries have been used for centuries, with the earliest evidence coming from a series of keno slips found in China dating back to the Han dynasty (205–187 BC). It was during this period that Chinese emperors first began giving away land and other valuable goods through lottery draws.

In early American history, lotteries formed a rare point of agreement between Thomas Jefferson, who saw them as no more risky than farming, and Alexander Hamilton, who grasped what would become the central idea of modern economics: that people are willing to hazard small sums for the chance of substantial gain.

By the nineteenth century, when America was struggling to build its nation, lotteries were used to raise funds for a wide variety of public projects. The Continental Congress used them to pay for the construction of the Mountain Road in Virginia; Benjamin Franklin promoted them to raise funds for cannons for the Revolutionary War; and John Hancock ran a lottery to rebuild Faneuil Hall in Boston.

Like almost everything else in early America, however, lotteries were tangled up with the slave trade, sometimes in unpredictable ways. George Washington managed a lottery that included human beings as prizes; and one formerly enslaved man, Denmark Vesey, purchased his freedom in a South Carolina lottery and went on to foment slave rebellions.

Today, lottery is a big business in the United States and around the world. It is the most popular form of gambling, with about half of all Americans playing it at least once a year. Most play scratch-off games, which tend to be the most regressive of all the lottery offerings. They are especially popular with lower-income and less educated players, who are disproportionately black or Hispanic. But the big money makers are the big jackpot games such as Powerball and Mega Millions, which attract middle-class players.

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