The lottery is a state-run contest that promises a prize to the winners, usually money. But the term can also refer to any contest in which a selection is made by random chance—from finding true love to being hit by lightning.
The first recorded lotteries were held in the Low Countries in the 15th century, to raise funds for town fortifications and poor relief. They were based on the ancient Roman practice of giving out prizes, often fancy dinnerware, to guests attending Saturnalian celebrations.
Most people who buy tickets for a lottery do so because they think the entertainment or other non-monetary value outweighs the cost. But when we look at the bigger picture, it’s clear that a large percentage of ticket sales goes toward federal and state taxes. That reduces the amount that’s available for the ostensible reason states have lotteries in the first place, such as education.
To keep ticket sales strong, most state lotteries pay out a reasonable percentage of the total jackpot in prize money. That leaves a smaller percentage to be used as state revenue, and it’s not clear that consumers are aware of the implicit tax rate on the tickets they’re buying.