Misc

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

Published

8 years ago

May 18, 2016

Jeff Desjardins

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:

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.

Related Topics:lottery inefficient tax poor lotto

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Politics

How Much Do Americans Trust the Media?

Media trust among Americans has reached its lowest point since Trump won the 2016 presidential election.

Published

2 days ago

December 2, 2023

Bruno Venditti

How Much Do Americans Trust the Media?

Media trust among Americans has reached its lowest point in six years.

Gallup began its survey on media trust in 1972, repeating it in 1974 and 1976. After a long period, the public opinion firm restarted the polls in 1997 and has asked Americans about their confidence level in the mass media—newspapers, TV, and radio—almost every year since then.

The above graphic illustrates Gallup’s latest poll results, conducted in September 2023.

Americans’ Trust in Mass Media, 1972-2023

Americans’ confidence in the mass media has sharply declined over the last few decades.

Trust in the mass media	% Great deal/Fair amount	% Not very much	% None at all
1972	68	24	6
1974	69	21	8
1976	72	22	4
1997	53	31	15
1998	55	35	9
1999	55	34	11
2000	51	37	12
2001	53	33	14
2002	54	35	11
2003	54	35	11
2004	44	39	16
2005	50	37	12
2007	47	35	17
2008	43	35	21
2009	45	37	18
2010	43	36	21
2011	44	36	19
2012	40	39	21
2013	44	33	22
2014	40	36	24
2015	40	36	24
2016	32	41	27
2017	41	29	29
2018	45	30	24
2019	41	30	28
2020	40	27	33
2021	36	29	34
2022	34	28	38
2023	32	29	39

In 2016, the number of respondents trusting media outlets fell below the tally of those who didn’t trust the media at all. This is the first time that has happened in the poll’s history.

That year was marked by sharp criticism of the media from then-presidential candidate Donald Trump.

In 2017, the use of the term ‘fake news’ rose by 365% on social media, and the term was named the word of the year by dictionary publisher Collins.

The Lack of Faith in Institutions and Social Media

Although there’s no single reason to explain the decline of trust in the traditional media, some studies point to potential drivers.

According to Michael Schudson, a sociologist and historian of the news media and a professor at the Columbia Journalism School, in the 1970s, faith in institutions like the White House or Congress began to decline, consequently impacting confidence in the media.

“That may have been a necessary corrective to a sense of complacency that had been creeping in—among the public and the news media—that allowed perhaps too much trust: we accepted President Eisenhower’s lies about the U-2 spy plane, President Kennedy’s lies about the ‘missile gap,’ President Johnson’s lies about the war in Vietnam, President Nixon’s lies about Watergate,”
Michael Schudson – Columbia Journalism School

More recently, the internet and social media have significantly changed how people consume media. The rise of platforms such as X/Twitter and Facebook have also disrupted the traditional media status quo.

Partisans’ Trust in Mass Media

Historically, Democrats have expressed more confidence in the media than Republicans.

Democrats’ trust, however, has fallen 12 points over the past year to 58%, compared with 11% among Republicans and 29% among independents.

How-Much-Do-Americans-Trust-the-Media

According to Gallup, Republicans’ low confidence in the media has little room to worsen, but Democrat confidence could still deteriorate and bring the overall national reading down further.

The poll also shows that young Democrats have less confidence in the media than older Democrats, while Republicans are less varied in their views by age group.