While you're dreaming of that winning lottery ticket for Wednesday's drawing, remember that as Think Progress's Jedd Legum points out, multi-state lotteries like Powerball and Mega Millions are scams where the house always wins.
In October, the consortium of states that runs Powerball approved a series of rule changed that made it much harder to win the jackpot. Under the new rules you select five of 69 numbers, up from five out of 59 numbers. The choices for the Powerball was actually reduced from 35 to 26. Still, this decreased the odds of winning the jackpot from 1 in 175 million to 1 in 292 million.
The purpose of this change was to increase the chances that there would be no grand prize winner for any given drawing. When this happens, the prize pool rolls over creating giant jackpots. At the time the rule changes were first floated in July, FiveThirtyEight estimated that the chances of a $1 billion prize pool increased from 8.5% to 63.4% over a given five year period.
At the same time, the decreased number of choices for the individual Powerball made winning small $4 prizes more likely. “The rules change is intended to increase the odds of winning any prize, while making it more difficult to win the jackpot prize,” the New York State Gaming Commission wrote in a memo supporting the change.
The purpose of creating massive jackpots is because they induce more people to play. The prospect of big payouts spark a flood of free media attention, encouraging people to speculate on how a windfall would impact their life.
And it's a regressive tax that hits those who can least afford it.
The “slump” in lottery ticket sales, of course, is relative. In 2014, Americans spent $70.15 billion on lottery tickets. That’s about $630 for every household in the United States.
Spending on lottery tickets exceeds the amount of money spent on sports tickets, books, video games, movies and music, combined.
For all the money Americans spend, they get very little in return — particularly the poorest.
The odds of winning any lotto jackpot are extremely low. And that means people spend a lot of money without getting much, if anything, back. Players lose an average of 47 cents on the dollar each time they buy a ticket.
And it’s those who can least afford to lose any money who are most likely to be buying tickets. Low-income people account for the majority of lottery sales, while sales are highest in the poorest areas. One study found that the poorest third of households buy more than half of the tickets sold in any given week.
Profit from those ticket sales go to government coffers. The share of lottery profits that is paid out to players varies greatly by state, from just 15 percent in West Virginia to 76 percent in Massachusetts. But even that smaller share in the latter state is an important source of revenue. In 2009, lotteries in 11 states brought in more revenue than the corporate income tax. And thus the lottery acts like an implicit 38 percent tax on mainly the poorest people.
That right, in 11 states, people fork over more for lottery tickets than corporations do in taxes. As a result, states cut services and taxes from those who can afford it, because the money's coming from those who can least afford it but are most willing to volunteer for the "sucker tax".
And in the end, we all lose this game, because the house always wins.