Why the Lottery is a Regressive Tax on the Nation's Poorest
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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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Automotive

The Most Fuel Efficient Cars From 1975 to Today

This infographic lists the most fuel efficient cars over the past 46 years, including the current leader for 2023.

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The Most Fuel Efficient Cars From 1975 to Today

When shopping for a new car, what is the most important factor you look for? According to Statista, it’s not design, quality, or even safety—it’s fuel efficiency.

Because of this, automakers are always looking for clever ways to improve gas mileage in their cars. Beating the competition by even the slimmest of margins can give valuable bragging rights within a segment.

In this infographic, we’ve used data from the EPA’s 2022 Automotive Trends Report to list off the most fuel efficient cars from 1975 to today.

Editor’s note: This is from a U.S. government agency, so the data shown skews towards cars sold in North America.

Data Overview

All of the information in the above infographic is listed in the table below. Data was only available in 5-year increments up until 2005, after which it switches to annual.

Model YearMakeModelReal World Fuel Economy (mpg)Engine Type
1975HondaCivic28.3Gas
1980VWRabbit40.3Diesel
1985ChevroletSprint49.6Gas
1990GeoMetro53.4Gas
1995HondaCivic47.3Gas
2000HondaInsight57.4Hybrid
2005HondaInsight53.3Hybrid
2006HondaInsight53Hybrid
2007ToyotaPrius46.2Hybrid
2008ToyotaPrius46.2Hybrid
2009ToyotaPrius46.2Hybrid
2010HondaFCX60.2FCEV
2011BMWActive E100.6EV
2012Mitsubishii-MiEV109EV
2013ToyotaiQ EV117EV
2014BMWi3121.3EV
2015BMWi3121.3EV
2016BMWi3121.3EV
2017HyundaiIoniq Electric132.6EV
2018HyundaiIoniq Electric132.6EV
2019HyundaiIoniq Electric132.6EV
2020Tesla3138.6EV
2021Tesla3139.1EV

From this dataset, we can identify three distinct approaches to maximizing fuel efficiency.

Downsizing

Prior to 2000, the best way for automakers to achieve good fuel efficiency was by downsizing. Making cars smaller (lighter) meant they could also be fitted with very small engines.

For example, the 1985 Chevrolet Sprint was rated at 49.6 MPG, but had a sluggish 0-60 time of 15 seconds.

Hybrids

The 2000s saw the introduction of mass-market hybrid vehicles like the Honda Insight and Toyota Prius. By including a small battery to support the combustion engine, automakers could achieve good MPGs without sacrificing so heavily on size.

While the Insight achieved better fuel economy than the Prius, it was the latter that became synonymous with the term “hybrid”. This was largely due to the Prius’ more practical 4-door design.

The following table compares annual U.S. sales figures for both models. Insight sales have fluctuated drastically because Honda has produced the model in several short spans (1999-2006, 2009-2014, 2018-2022).

YearInsight SalesPrius Sales
2005666107,155
2006722106,971
20073181,221
2008-158,884
200920,572150,831
201020,962140,928
201115,549136,464
20126,619236,655
20134,802234,228
20143,965207,372
20151,458184,794
201667136,629
20173108,661
201812,51387,590
201923,68669,718
202015,93243,525
202118,68559,010
20227,62833,352

Source: goodcarbadcar.net

The Prius may have dominated the hybrid market for a long time, but it too has run into troubles. Sales have been declining since 2014, even setting historic lows in recent years.

There are several reasons behind this trend, with one being a wider availability of hybrid models from other brands. We also can’t ignore the release of the Tesla Model 3, which began shipping to customers in 2017.

Electric Vehicles

We’re currently in the middle of a historic transition to electric vehicles. However, because EVs do not use fuel, the EPA had to develop a new system called MPGe (miles per gallon of gasoline-equivalent).

This new metric gives us the ability to compare the efficiency of EVs with traditional gas-powered cars. An underlying assumption of MPGe is that 33.7 kilowatt-hours (kWh) of electricity is comparable to the energy content of a gallon of fuel.

The most fuel efficient car you can buy today is the 2023 Lucid Air, which achieves 140 MPGe. Close behind it is the 2023 Tesla Model 3 RWD, which is rated at 132 MPGe.

Check out this page to see the EPA’s top 10 most efficient vehicles for 2023.

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