Gambling is a game that operates on the basic knowledge of probability. It gives its participants a chance to win considerable amount of money with the use of a little cash or something that has a lesser value than the prize. The gambling state or person operates on a principle that the accumulated amount is always more than the prize offered. This, therefore, is an assurance of profit in a game of lottery. People associate lottery with corruption and believe that the game makes a state appear as a con artist. However, the contradicting truth is that lottery helps states to improve their economy and stabilize their financial systems. This paper lies down the considerable positive effects of lottery on the economy of a state.
Lottery game is ancient in many European and American states. The game dates back to 1612 in America. His happened when colonies were still under the command of the British Crown, which prohibited tax collection from states that were under colonization. However, the British Crown legalized the use of games that helped the colonies realize profits. These games were in the form of lottery. Lottery exists in three versions of general lotteries, instant lotteries, and lotto. In, general lottery, the winner of a lottery takes a fixed percentage of the cumulative amount collected in a lottery. The winning number is always among the lot thus an assurance of a winner. In, instant lottery, prizes are offered immediately upon winning. This category comprises of games such as scratch-off tickets and pull-tabs. The difference between lotto and general lottery is that winning is not mandatory in lotto. A computer might pick a lotto number that is still in the lot and not in possession of participants. This makes lotto more profitable than both general lottery and instant lottery (Erekson, 2002).
Currently, more than thirty states run legal state lotteries. The administration of these lotteries is under the director of lottery who heads the state agents and lottery agencies. These agencies are responsible for coming up with rules and regulations that govern the lottery activities. Among the rules, include size of the prizes, duration of the play, verification details of the winner and several legal requirements.
Effects of lottery on the economy of a state are numerous and positive. After the legalization of state lotteries in the 1970’s, several states have used lotteries to accumulate considerable amount of funds that have tremendous positive impacts on the economy. An example is the year 2002 that saw 39 states accumulate over $42 billion as government revenue from the state lottery. This figure was 100% more than what the states had collected before the legalization of gambling. This proves that lottery helps a state to collect a double figure compared to what states collects in normal taxes. This amount goes to government investments thus a boost in the economy of a state (Nibert, 2000).
Aside from funds collected in lotteries, the game offers the poor an alternative to evade heavy tax. The governments, therefore, reduces the amount of tax levied on basic goods and services and collect the funds on lotteries as an alternative. This goes well with sociologists who believe that tax favors the wealthy and oppresses the poor. The poor, therefore, avoids captivity of forced tax, and this makes them improve their living standards due to little amount of tax that they pay. This is an indirect boost on the economy of a state. However, critics of lotteries have a different perception of lottery revenues. They claim that the cost of operating a lottery is high thus reducing the profits to considerable amounts. This makes lottery revenues a hard-to-project source thus making a state depend on funds that have no assurance. This occurred in Maryland State in 1990 when the state faced a budget crisis caused by lottery failure. The state projected $8 million revenue from El Gordo lottery and fixed the amount in its budget. After the lottery, Maryland accumulated $73,626, and this led to a budget crisis in the state. This majorly occurs because of low sells of tickets as opposed to the stated expenditures on the lottery (Griffin & Harrison, 1996).
State gambling has also helped countries eliminate illegal gambling that deprived it of its revenue. Under the management of private agencies and personalities, illegal gambling affects the economy of a state negatively through various forms. First, the act cons citizens and lowers their spending rates on government products. This reduces the amount of tax that a state collects because citizens spend less than they would have spent before losing cash to illegal gamblers. The second direct effect occurs when illegal gamblers accumulate lottery revenue of its state.
A recent study carried out by Nibert indicates that revenues collected from the state lottery have low correlation with other forms of state revenues. This implies that lottery revenue may remain stable or even rise when other state revenues are falling. This shows that revenue from state lotteries forms a backup for a state’s economy in times of economic crisis.
Legalization of state lottery prevents a state from losing funds to other states that legalize the act. The demand of the lottery is great in many states thus making citizens of states that have not legalized lottery to channel their funds to states that have legalized state lottery. This deprives state direct revenue from gambling money and revenue from taxes that the money would have spent on household commodities.
In most states, a percentage of lottery funds find its way to charity programs. This is a rule that ensures the community benefits directly from the revenues collected from lottery. Among the sectors that benefit most on this charity funds is the education department. The amount of lottery funds given to educational funds kit sponsors the needy students thus increasing literacy level in a state. This has an indirect impact on the growth of the economy as it increases skilled labor and living standards of citizens in a state. Critics of state lottery believe that sates exaggerate lottery benefits in the education sector. The Education Research Institute argues that lottery revenues have substituted other forms of funds instead of increasing the educational fund kit. Whichever case, lottery funds are beneficial to the economy of a state. In case the substitution criticism is real, then the funds that would have been used in the education system still causes a boost to the economy when channeled to other development activities (Eberle, 1994).
Critics of lottery argue the game does not prevent the poor from heavy taxes as perceived. Research shows that the poor gamble more as compared to the rich with a hope of attaining richness in the game. They, therefore, believe that tax for the poor got a replacement with lottery revenue. Although the claims are true to a considerable magnitude, gambling remains a voluntary game that does not impose forced tax like revenue collected on tax. This implies that the poor who cannot afford gambling will not play the game but will channel their expenditure to basic commodities thus improving their living standards (Nibert, 2000).
In conclusion, state lottery boosts the economy to large extends. Funds collected as revenue and those channeled to other sectors such as education contribute either directly or indirectly to the growth of the economy. However, states must ensure that gambling is limited to chance. Anti-corruption rules and measures to prevent social problems associated with state lottery will make the game a perfect economy booster.