Mega Millions is just a tax on U.S. lower class

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From ZeroHedge:

With the Mega Millions Jackpot now nearly $1 billion, people, mostly those in the lower and middle classes, are coming out in droves and buying lottery tickets with hopes of striking it rich. After all, with $1 billion one can even afford healthcare in America.


Naturally, we wish the lucky winner all the (non-diluted) best. There is, however, a small problem here when one steps back from the Sino Forest trees. As DataTrekResearch’s Nicholas Colas previously explained,

Lotteries essentially target and encourage lower-income individuals into a cycle that directly prevents them from improving their financial status and leverages their desire to escape poverty. Yes, that’s a bit harsh, and yes, people have the right to make their own decisions. Even bad ones… Also, many people tend to significantly overestimate the odds of winning because we tend to assess the likelihood of an event occurring based on how frequently we hear about it happening. The technical name for this is the Availability Heuristic, which means the more we hear about big winners in the press, the less uncommon a big payday begins to seem.”

Call it that, or call it what one wishes, the end result is that the lottery is nothing but society’s perfectly efficient way of, to use a term from the vernacular, keeping the poor man down while dangling hopes and dreams of escaping into the world of the loathsome and oh so very detested “1% ers”.  Alas, the probability of the latter happening to “you” is virtually non-existent.


Full explanation from Nick Colas, originally posted in 2012, (now of DataTrekResearch) on how and why Americans are lining up in lines around the block to… pay more taxes.

What Seems To Be Is Always Better Than Nothing

Summary: American adults spent an average of $251 on lottery tickets last year. With a return of 53 cents on the dollar, this means the average person threw away $118 on unsuccessful lotto tickets – not a great investment. So why are we spending so much? Well, lotteries are a fun, cheap opportunity to daydream about the possibility of becoming an overnight millionaire, but on the flip side people tend to overestimate the odds of winning. Lower-income demographics spend a much greater portion of their annual earnings on lottery tickets than do wealthier ones. Since lotteries are state-run, that effectively means that the less affluent pay more in taxes (albeit by choice) than broadly appreciated. And even winning the lottery doesn’t guarantee financial success. More than 5% of lottery winners declare bankruptcy within 5 years of taking home the jackpot. Despite their drawbacks, though, lotteries are no doubt here for the long haul – in states that have lotteries, an average of 11% of their total revenues come from lottery ticket sales, and the number is even as high as 36% in 2 states (West Virginia and Michigan).

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Note from Nick: Daydreams may be the best example of a product in an inflationary spiral; the price of a Powerball lottery ticket went from $1 to $2 on January 1st. That news got me thinking about the price elasticity of fantasies. After all, the state lottery commissions involved in this venture must believe that a 100% price bump will not deter enough customers to lower their overall take. That’s a big gamble (pun intended) to take on what is an increasingly important revenue input for many state budgets. Beth takes up the story from here…

Consider the following credit-card-advertisement style sequence of statistics:

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Lottery ticket sales in the US in 2010: $59 billion Average spending per person: $191 Average spending per adult: $251 Chance at hitting the jackpot: (Apparently) priceless.

I have never bought a lottery ticket and honestly don’t even know how. And as far as I’m aware, I don’t know anyone who spends north of 200 bucks a year playing the lotto. The only lottery my friends play is the NYC marathon lottery, where they’re gambling for maybe a 1 in 13 chance to fork over $255 for the privilege of slugging out 26 miles through the city’s streets. Not quite hitting the jackpot in most people’s minds.

But someone, somewhere is buying all those tickets. In Massachusetts, where the lottery is more popular than in any other state, people spend an average of $634 a year on Mega Millions, Powerball and the like. Delaware comes in at number 2 with $504 spent per person, while Rhode Island ($469), West Virginia ($388) and New York ($357) round out the top 5. North Dakota brings up the rear with per capita lottery spending of $34. You can see the full list in the table following the text…

Continue reading at ZeroHedge…


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