The Multi-State Lottery Association, which runs Powerball, places the odds of any one ticket winning at 175 million to 1. As Ben Casselman of The Wall Street Journal points out, this would actually make purchasing a ticket statistically defensible, if the payout were indeed $590.5 million. But it's not. If the winner chooses an immediate payout, he or she receives "only" about $375 million; getting the full amount involves earning interest and can only be received over a span of 29 years. More importantly, though, are the taxes. The precise rate at which Powerball winnings are ultimately taxed can be hard to be pin down, because it depends on a number of factors, including the city and state in which the winner resides, and how he or she chooses to be paid. Saturday's winner is, presumably, fortunate enough to reside in Florida, a state without a personal income tax. Nevertheless, the winner - and, by extension, all the consumers of tickets - will be transferring almost $150 million to the federal government.
Factoring in all the deductions to the winning amount, the true value of a single ticket is less than half what it actually costs. Which is to say that Powerball, along with state lotteries, is a rigged game. It's just another way of assaulting the lower classes and extracting as much of their meager wealth as possible; the economist Richard Wolff straightforwardly calls lotteries "mechanisms to redistribute wealth from the poorer to the rich."
Lotteries are still viewed favorably in popular culture, though, as though they represent nothing more than innocent fun. People in the media speak lightly about them and we are inundated with propaganda selling us on the joys of this particular form of gambling. But Powerball and state lotteries are far from innocuous. They prey on the credulity and economic anxieties of the least-educated members of society. A 2006 survey found that 21% of Americans consider playing the lottery to be "the most practical way to accumulate several hundred thousand dollars." This despite the fact that the odds of winning the average state lottery are about 80 million to 1, and the odds of winning this recent Powerball were more than twice that. For some statistical context, the odds of being killed by a flesh-eating bacteria are approximately 1 million to 1, and the odds of being struck by lightning are roughly 10,000 to 1. Purchasing a lottery ticket represents the height of irrationality. This is why academic research has shown that "the more education one has the less one spends on lottery tickets."
It's time to start thinking differently about lotteries. There is a dark side to this American institution that has just not penetrated the public consciousness. Thinking people should not lend any kind of support to this vicious and predatory scheme to extract wealth from those who can least afford it.
(Originally posted at www.justindoolittle.net)