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Why the Lottery is a Regressive Tax on the Nation’s Poorest

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Every year, Americans spend a mind-blowing $70.1 billion on the lottery. That works out to an average of $630 per household, representing more money spent on gambling than on books, sports tickets, recorded music sales, video games, and the movie box office – all combined!

U.S. consumption of lottery tickets

This is according to data visualization expert Max Galka, who published a series of posts and visualizations on the economics of the lottery in his Metrocosm blog. The numbers he provides are both astounding and alarming, ultimately making a convincing case that the lottery is a regressive and inefficient tax on some of the nation’s poorest people.

Let’s start with the economics. Here’s the math on the New York Lottery, which is a starting point to understanding the inefficiency behind lottos in the first place:

New York Lottery diagram

To sum up the math:

  • 51% of each dollar goes to tax revenue: federal, state, and municipal.
  • 18% goes to covering expenses, such as advertising or retailer commissions. This is the part that makes the process inefficient.
  • 31% of each dollar actually goes to the prize money, and that basically sums up the terrible odds behind winning in the first place.

In other words, for every $3 spent on the New York Lottery, less than $1 is paid out to winners, while the other $2 is going to expenses and tax revenues.

The House Advantage

As Max notes in one of his posts, the lottery itself is not a tax – but the artificially inflated price of lottery tickets ultimately ends up as an indirect excise tax:

House Advantage in Lottery

Choosing to play the lottery is voluntary. But much like sales taxes, the inflated price of lottery tickets is not.

It is illegal for anyone but the state to run a lottery. So unlike casinos, which face competition from other casinos, lotteries operate as a monopoly, so they can set their pricing artificially high, or equivalently, their payout rates artificially low.

While it is true that many people stay away from lottery tickets because the odds are not in their favor, there are groups of people that are far less fortunate. They and their families bear the brunt of inefficient lotto economics, as well as the house advantage.

Who’s Buying Lottery Tickets?

Lottery sales follow the 80/20 rule. It turns out that 82% of all sales come from 20% of the players.

Many of these players are compulsive gamblers, and many also come from lower income brackets.

In this post, which includes some key assumptions, Max shows that the “lottery tax” is a significant burden for many low-income households even in contrast with other taxes:

Lotto Tax

Want more perspective on lottery ticket sales? We previously showed a similar comparison of U.S. consumption numbers in real-time.

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Economy

How Global Health and Wealth Has Changed Over Two Centuries

This unique animated visualization uses health and wealth measurements to chart the evolution of countries over time.

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two centuries of health and wealth

How Global Health and Wealth Has Changed Over 221 Years

At the dawn of the 19th century, global life expectancy was only 28.5 years.

Outbreaks, war, and famine would still kill millions of people at regular intervals. These issues are still stubbornly present in 21st century society, but broadly speaking, the situation around the world has vastly improved. Today, most of humanity lives in countries where the life expectancy is above the typical retirement age of 65.

At the same time, while inequality remains a hot button topic within countries, income disparity between countries is slowing beginning to narrow.

This animated visualization, created by James Eagle, tracks the evolution of health and wealth factors in countries around the world. For further exploration, Gapminder also has a fantastic interactive chart that showcases the same dataset.

The Journey to the Upper-Right Quadrant

In general terms, history has seen health practices improve and countries become increasingly wealthy–trends that are reflected in this visualization. In fact, most countries drift towards the upper-right quadrant over the 221 years covered in the dataset.

However, that path to the top-right, which indicates high levels of both life expectancy and GDP per capita, is rarely a linear journey. Here are some of the noteworthy events and milestones to watch out for while viewing the animation.

1880s: Breaking the 50-Year Barrier
In the late 19th century, Nordic countries such as Sweden and Norway already found themselves past the 50-year life expectancy mark. This was a significant milestone considering the global life expectancy was a full 20 years shorter at the time. It wasn’t until the year 1960 that the global life expectancy would catch up.

1918: The Spanish Flu and WWI
At times, a confluence of factors can impact health and wealth in countries and regions. In this case, World War I coincided with one of the deadliest pandemics in history, leading to global implications. In the animation, this is abundantly clear as the entire cluster of circles takes a nose dive for a short period of time.

1933, 1960: Communist Famines
At various points in history, human decisions can have catastrophic consequences. This was the case in the Soviet Union (1933) and the People’s Republic of China (1960), where life expectancy plummeted during famines that killed millions of people. These extreme events are easy to spot in the animation due to the large populations of the countries in question.

1960s: Oil Economies Kick into High Gear
During this time, Iran, Iraq, and Saudi Arabia all experience massive booms in wealth, and in the following decade, smaller countries such as the United Arab Emirates and Kuwait rocket to the right edge of the visualization.

In following decades, both Iran and Iraq can be seen experiencing wild fluctuations in both health and wealth as regime changes and conflict begin to destabilize the region.

1990s: AIDS in Africa
In the animation, a number of countries plummet in unison at the end of the 20th century. These are sub-Saharan African countries that were hit hard by the AIDS pandemic. At its peak in the early ’00s, the disease accounted for more than half of deaths in some countries.

1995: Breaking the 65-Year Barrier
Global life expectancy reaches retirement age. At this point in time, there is a clear divide in both health and wealth between African and South Asian countries and the rest of the world. Thankfully, that gap is would continue to narrow in coming years.

1990-2000s: China’s Economic Rise
With a population well over a billion people, it’s impossible to ignore China in any global overview. Starting from the early ’90s, China begins its march from the left to right side of the chart, highlighting the unprecedented economic growth it experienced during that time.

What the Future Holds

If current trends continue, global life expectancy is expected to surpass the 80-year mark by 2100. And, sub-Saharan Africa, which has the lowest life expectancy today, is expected to mostly close the gap, reaching 75 years of age.

Wealth is also expected to increase nearly across the board, with the biggest gains coming from places like Vietnam, Nigeria, and the Philippines. Some experts are projecting the world economy as a whole to double in size by 2050.

There are always bumps along the way, but it appears that the journey to the upper-right quadrant is still very much underway.

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Misc

Slices of the Pie: Mapping Territorial Claims in Antarctica

Antarctica is the most inhospitable region on Earth, but that hasn’t stopped countries from making territorial claims. This maps shows them all.

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antarctica territorial claims

Slices of the Pie: Mapping Territorial Claims in Antarctica

For the 55% of the world’s population who reside in cities, land is viewed as a precious commodity—every square foot has a value attached to it. As the global population continues to rise toward the eight billion mark, it can seem like humans have laid claim to every available corner of the earth.

While this is mostly true, there is one place on the planet that is vast, empty, and even partially unclaimed: Antarctica.

Today’s map, originally created by the CIA World Factbook, visualizes the active claims on Antarctic territory, as well as the location of many permanent research facilities.

The History of Antarctic Territorial Claims

In the first half of the 20th Century, a number of countries began to claim wedge-shaped portions of territory on the southernmost continent. Even Nazi Germany was in on the action, claiming a large swath of land which they dubbed New Swabia.

After WWII, the Antarctic Treaty system—which established the legal framework for the management of the continent—began to take shape. In the 1950s, seven countries including Argentina, Australia, Chile, France, New Zealand, Norway, and the United Kingdom claimed territorial sovereignty over portions of Antarctica. A number of other nations, including the U.S. and Japan, were engaged in exploration but hadn’t put forward claims in an official capacity.

Territorial claims in AntarcticaTerritory nameArea of claim
🇦🇺 AustraliaAustralian Antarctic Territory3,663,915 mi² (5,896,500 km²)
🇳🇴 NorwayQueen Maud Land1,677,702 mi² (2,700,000 km²)
🇬🇧 United KingdomBritish Antarctic Territory1,062,171 mi² (1,709,400 km²)
🇦🇷 Argentina Argentine Antarctica908,194 mi² (1,461,597 km²)
🇨🇱 ChileChilean Antarctic Territory776,874 mi² (1,250,258 km²)
🇳🇿 New ZealandRoss Dependency279,617 mi² (450,000 km²)
🇫🇷 FranceAdélie Land268,432 mi² (432,000 km²)

Despite the remoteness and inhospitable climate of Antarctica, the idea of claiming such large areas of landmass has proven appealing to countries. Even the smallest claim on the continent is equivalent to the size of Iraq.

A few of the above claims overlap, as is the case on the Antarctic Peninsula, which juts out geographically from the rest of the continent. This area is less remote with a milder climate, and is subject to claims by Argentina, Chile, and the United Kingdom (which governs the nearby Falkland Islands).

Interestingly, there is still a large portion of Antarctica that remains unclaimed today. Just east of the Ross Ice Shelf lies Marie Byrd Land, a vast, remote territory that is by far the largest unclaimed land area on Earth.

While Antarctica has no official government, it is administered through yearly meetings known as the Antarctic Treaty Consultative Meetings. These meetings involve a number of stakeholders, from member nations to observer organizations.

Frontage Theory: Another Way to Slice it

Of course, critics could argue that current claims are arbitrary, and that there is a more equitable way to partition land in Antarctica. That’s where Frontage Theory comes in.

Originally proposed by Brazilian geopolitical scholar Therezinha de Castro, the theory argues that sectors of the Antarctic continent should be distributed according to meridians (the imaginary lines running north–south around the earth). Wherever straight lines running north hit landfall, that country would have sovereignty over the corresponding “wedge” of Antarctic territory.

The map below shows roughly how territorial claims would look under that scenario.

hypothetical Antarctica frontage territories claims

While Brazil has obvious reasons for favoring this solution, it’s also a thought experiment that produces an interesting mix of territorial claims. Not only do nearby countries in Africa and South America get a piece of the pie, but places like Canada and Greenland would end up with territory adjacent to both of the planet’s poles.

Leaving the Pie Unsliced

Thanks to the Antarctic Treaty, there is no mining taking place in Antarctica, and thus far no country has set up a permanent settlement on the continent. Aside from scattered research stations and a few thousand researchers, claims in the region have a limited impact.

For the near future at least, the slicing of the Antarctic pie is only hypothetical.

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