It is somewhat common knowledge that state lotteries are a form of regressive tax.
The people who can least afford it are throwing away on average 47 cents on the dollar every time they buy a ticket. And the government, which relies increasingly on the lottery for funding, goes out of its way to tell them it is a good idea.I've always wondered why these are the only types of lotteries we ever see. As an analogy, we can look at casinos. (I'm just using casinos as an analogy. I don't want to get tangled up in all the specific probabilities and varieties)
Generally speaking, in casinos, they have slot machines where the buy-in can be low enough that most people can play them many times. These are the games where the most people flock to, because the payouts can be many times as high as the buy-in, and to a lesser extent of importance, they're the easiest to play. But these games also have the lowest chance of winning, and coincidentally, tend to bring in the most profit for the casinos. More people tend to win less than they spend, and by a larger difference. Slot machines are most like the state lotteries we see today.
But there are also casino games at the opposite spectrum, like baccarat and craps. The buy-ins are prohibitively high so that only a small percentage of people play them. The rules are much more complex, but there are many more ways to win, and the odds of winning more money than they spend are much higher. Casinos don't make as much money from these games, but the reason they include them is because it attracts the high-rollers, who spend more money in other ways. There's also a class-separation involved; there's a sense that only the most refined, dignified, and wealthiest individuals play these games. This further entices the wealthy to play, for the class factor.
So what does this version of the state lottery look like?
In general, we would see a lottery with a large buy-in, say, $100 a ticket. This is to deter the usual people who play the lottery from playing these games. But then how would it attract people who don't normally play the lottery? The ones with less reason to play, because they tend to have more money and less difficult circumstances overall, which is why lotteries are so regressive in the first place. There would have to be much higher odds of winning, say, 1 in 1000. The payouts would also have to be high enough that the state's profits from these games are much less.
This may be seen as unfair to the people who cannot afford to play the high-end version, but I would say that that is the cost of getting people to play the lottery who wouldn't normally play. And largely, the American economy runs on this implicit rule, that the wealthier you are, the easier it is to play the game, from taxes, education, to investing. At least in this case, the cost of an inequality in pay structure has the benefit of a less regressive lottery system, or a voluntary tax on the wealthy.
States have all different types of lotteries. Invariably, though, they are of the slot machine-type: small buy-in, small chance of winning.
So why aren't there more lotteries of the baccarat type: large buy-in, large chance of winning?
The only reason two reasons that I can think of: nobody's thought of it yet, or they have and they are using the lottery specifically as a regressive tax.
Another reason might be that states just want to invest in lotteries that provide the most profit per investment. That's a compelling reason, but most states have shown that they are willing to play many different types of lottos, so the return on investment is different for all of them. As long as the lottery is profitable, which is guaranteed by statistics, states should be willing to try the high-end lotteries as well.
Because this has never been tried, it's hard to say whether or not the wealthy would even play. Why wouldn't they just put their money in the safer investments, like...investments?
The fact that there is a luxury-end market for casino games is evidence that there is a market of wealthy-individuals who want to gamble. If the state lotteries are designed so the risks vs. reward are comparable to high-end casino games, there should be enough players that the state still sees a profit. If not, casinos would've eliminated these games long ago. The high-end lotto can also be designed to be more fun to play to further entice people.
Another incentive can be that the states make sure to allocate profits from the high-end casinos to services that the high-end players care about, but also benefit the community as a whole. Services like community arts and I can't think of any more examples off the type of my head, but there must be others.
And at least the state lotteries give a chance for the wealthy to know that their losses are going to the community, instead of privately owned casinos and other private investors.
There's also the risk of a certain subset of people who play the normal lotteries, the ones who can't process the risks properly, and try their hand at the high-end ones, and would not be deterred by the high amount to play. But then again, these are the type of people where it doesn't matter if they buy 1 $100 ticket or 100 $1 tickets. There could be additional rules built into this set of lotteries to try to make it harder for these people to play, and we would have to see as time goes on how much of a problem these people are. But because we live in a society that allows gambling and lotteries, these people are always going to be an issue, either way.
So I think we should find a way to convince states to start more high-end lotteries. The statistics involved are essentially the same so they will still provide states with profits like the other lotteries do, but they also have the benefit of encouraging wealthier people to play, and undo the regressive component of state lotteries.