The US Lottery is a Lie

- The next 15 minutes could change your life forever.

- $1.34 billion ticket.

- Every year, tens of millions of Americans spend their money on these, lottery tickets.

I always imagine them as like these cool colorful things but this is just like a receipt with a barcode.

These things are usually at a gas station or a grocery store and typically you get it from like a guy behind a counter or from one of these cool flashy machines.

They cost anywhere from a few cents to like a hundred bucks.

And as more and more people buy tickets, all of that money goes into one big pot, the jackpot and it grows and it grows and sometimes can rack up to like $2 billion - That much money.

- Yesiree.

- Third Mega Millions trolling to break a billion dollars.

- 1.3 billion, 1.9 billion, 2.04 billion.

- And even though everyone buying tickets presumably wants to win the jackpot at the end of the day after all the ping pong balls and the numbers and the weird game show looking thing, only one person actually does - 1.9 billion.

- I can't believe it.

- And it can be yours for just two bucks.

- Meanwhile, everyone else is left just a little poorer.

- Phoebe, you don't have any of the first five numbers.

- This is the lottery.

It is a government sponsored gambling game that is surprisingly human.

Like we've been doing this for thousands of years and we will probably continue to do it for thousands more and not just like in the United States, all over the world.

And it's almost always the government who's running the lottery.

Okay, so like a little harmless fun that helps the government make a little extra money.

It's not a big deal, right?

No, these are not small numbers.

This is not a little anything.

In 2021, Americans spent over 100 billion on lotteries 100 billion, that's with a B.

These are giant numbers.

This is something we should look into.

Okay, so let's dive into this.

Why do we do lotteries and why is the government running these things and what do they use the money for?

And I guess most importantly is this even ethical - 1.35 billion - Chance to win one million dollars.

- What would you do with a lot of money?

- Record shattering $1.34 billion ticket.

- I can feel the winning ticket.

- I'm fairly certain this is the winning ticket.

- Humans are big on gambling.

We've been doing this for thousands of years.

- 14,500,000 all in - One of the first versions of a lottery was over in China.

It's rumored that they actually used the lottery to fund some of the Great Wall of China.

Oh, and after they like chose the numbers the results are said to have been delivered by carrier pigeon.

The Romans, the Dutch, and a bunch of other governments over time and throughout the entire world have done lotteries to usually fund big projects that the government wanted to do.

In England they also loved lotteries and the settlers who wanted to come here to the new world used lotteries to help fund their trip.

Eventually the monarch of England was like, whoa, guys wait a second.

Don't use your extra money to fund lotteries that make you leave us.

Use your money over here.

Taxes were kind of a sensitive topic for England.

But anyway, the colonists were like, all right, bet bet like bet.

You know, like bet like.

Bet bet.

(upbeat music) I'm not in touch, I'm not in touch.

So they don't do lotteries for like a hundred years.

But then eventually they tried to do a lottery to like fund their war to against England to become like free from England.

So yeah, lotteries are not new.

They've been used for a long time and governments have always run them, blah, blah, blah.

But in the past few decades lotteries have turned into something much bigger and more and more they've begun to target a certain kind of person.

Let's, let's go see if I can win the lottery.

(upbeat music) I just spent two US dollars on a lottery ticket.

Let's see what happens.

The jackpot for this one is 20 million bucks.

Seems like a pretty good deal.

There's this one lottery called the Mega Millions.

It's where a bunch of states put all of their lotteries together into one giant lottery which means way more people which also means a way higher jackpot which then attracts more people.

And then it's just like the greatest thing in the world for the lottery.

Okay, wait, but why does the government run a gambling scheme that incentivizes people to like spend their money on gambling?

We'll get there in a second, just hold on.

But for now, I just need to revel in what is happening in my brain right now.

This very human feeling of buying a $2 ticket.

So low risk, I didn't have to pay that much but the potential of $20 million, the Mega Million lottery is making me realize why gambling is so enticing.

And for such a simple little game with Mega Million you choose six numbers.

The first one having to be between one and 70 and the last one having to be between one and 25.

No idea how they calculated those rules, but whatever.

Okay, you choose your numbers.

You can also just tell them to choose the numbers and an algorithm will do it for you, which is like, listen I already have an algorithm sort of running my life most of the time.

If I'm gonna gamble, I'm gonna choose the (bleep) numbers myself.

I got a little heated there.

Anyway, eventually a bunch of balls go into this little spiny thing and they choose the numbers and if they choose my numbers, I win $20 million.

So at two bucks a ticket, we can infer that probably millions of Americans just did this.

They went out and bought a ticket like this with hopes of changing their lives.

Oh, and this isn't just like once a year or something.

This is twice a week.

They'll hopefully be drawing my numbers tomorrow night and I will be watching.

Anyway, let's get back to the explanation.

- I got a special feeling tonight Mary Anne - Oh, for me?

- No, no no I think I had numbers might come up.

- So here in the US you've got a bunch of these big mega multi-state lotteries and they're all run actually by the same non-profit organization.

But then you also have these, you've got these little just instant winners like like I could scratch this off right now and see if I win.

10 chances to win.

We have to do this right now.

Where's a penny?

No, seriously, we gotta, we've got to do this.

Up to 5,000 bucks.

Wait a minute, this has to be a joke.

What does that say?

- It says $1,000, but I don't know.

- There's no way.

Oh (bleep) no.

- You might have to get like three of them.

- Yeah.

- Oh, reveal a, oh, see I don't know how to gamble.

I was like, I just won a thousand dollars.

19, 24. Come on oh man the rush is so real.

Womp womp.

That's so sad.

I was so ready to win today.

Okay, sorry, I'm getting out of my like intoxicated buzz of gambling, which clearly I haven't done enough.

I grew up Mormon okay, give me a break.

You scratch off this latex you see if you won, you don't win.

I didn't win.

It's actually really satisfying, but it's kind of messy.

You also have smaller lotteries that are usually more frequent, but they're smaller jackpots but you have better odds.

Anyway the point is there are all sorts of lotteries.

Speaking of odds, what are my odds of winning the big jackpot?

According to one statistician who crunched all the numbers my odds for winning on this ticket is like one in 302 million, which like, let's be honest no one really knows what that means.

I don't know what that means.

Like what is that 302 million?

That's a bigger number than than my brain can fathom.

So let's do a visualization.

Imagine you have 66 bathtubs.

I mean, I'm not sure why you need 66 bathtubs.

It seems a little bit excessive, but who am I to judge?

And yes, I know a lot of you noticed I cut my hair.

That's because I couldn't handle not shampooing my long hair.

Okay, let's just get it out of the way.

I know everyone's been thinking it.

Anyway, you've got these 66 bathtubs and each of them is filled to the brim with rice.

4.5 million grains of rice in fact.

How did we calculate that number?

Go to the sources.

We actually did an analysis to see how many grains of rice would fit into these bathtubs.

4.5 million.

So you've got 66 bathtubs and they're all full of rice and one of those grains of rice is painted gold.

Now close your eyes, walk through the field and thrust your hand into one of these 66 bathtubs and pick out a grain of rice and maybe you found the golden grain.

But yeah, those are my odds of winning tomorrow night.

Not as fun to think of it like that.

And this works even if you buy a ton of tickets or use the same numbers over and over again.

None of this really does anything meaningful to change your odds.

Mr. Beast did this great video a while back where he bought a million dollars worth of scratch off tickets and lost about 300,000.

Okay, so we're done with this part of the video.

The lottery exists, it's big, you'll probably lose.

We all know that.

My bigger question here is why does the government have a monopoly on this gambling game?

- Got a lottery ticket have you?

- I just so happened to have one.

- No, you can't do that.

You have to leave it with me and I'll look after it for you.

You can come visit us anytime you want to.

- Some economists argued that gambling is this natural thing that humans love to do.

So if they're gonna do it anyway, why not use that as a game to generate revenue for the government?

But to me that begs the question of like what do they actually use the money for?

Luckily there's data for that and for an example let's use this giant lottery called the Powerball.

And let's make the numbers easy here.

Let's just say that everyone has bought tickets and the big pot has totaled up to $100 million.

Which is like, you know actually in the ballpark of something that could happen.

Half of that money goes to fund the jackpot.

So let's just say that $40 million is for the jackpot and the remaining 10 million goes to all the smaller prizes.

Okay, but under the hood, something else is going on.

If you look at all the billboards for the Powerball at this moment, it will actually advertise it as $67 million for a reason that I will explain in a second.

But the point is that only 50% of all the money generated goes to the people who bought the tickets.

So the question is, where does that other 50 million go?

Well, 6% of that a hundred million goes to all of the gas stations and convenience stores and like other businesses who sell the tickets, they get in on some of this.

9% of the a hundred million dollars, so like 9 million bucks goes to pay all the people and expenses associated with like running the lottery like all the advertising and like the employees and stuff.

These are private companies that contract with the government to run and advertise the lottery.

That leaves us with $35 million of our original a 100 million which according to Powerball's website, goes to quote good causes supported by the lotteries.

Womp womp.

What does that mean?

What are good causes?

The Powerball website won't tell you much but we did research into this and we found that from state to state the definition of good causes changes.

In a lot of states this money goes to quote education like in Virginia in 2022 where the lottery money was used to fund almost $780 million of the public education budget.

This is good, leveraging humans obsession with gambling to like fund the education of our children.

I'm super into it.

Oh, until you realize that yes, they give all this money to the education, but then they reduce the existing budget so that it ends up basically being the same number which means the lottery doesn't actually give any extra money to the education system, that is so stupid.

Oh, and the money isn't even distributed in an equitable way.

The funding a lot of time goes towards scholarships, colleges and ends up benefiting wealthier schools.

So yeah, that's what they mean by education kind of deceptive, not cool.

But then there's other places where the lottery pays for things that we take for granted that probably never would cross your mind.

Like in Colorado where the state spent $14 million on their parks and wildlife in 2019 using profits from the lottery.

Or in Nebraska where they used the money to fund like their state fair, like who would've guest, oh and this is a good one in Minnesota, they've spent over $51 million of lottery profits to fund organizations that help people who are addicted to gambling.

Like what?

Like we're using the lottery money to help people not gamble.

I don't know that means it's just that one's a weird one to me.

Okay, so governments use lottery money to do government things, build infrastructure fund public programs and stuff like that, cool.

Okay, wait, but why does the government have to collect money in this weird way?

We'll get to that I promise, but in a sec.

I know everyone's wondering about what happens to the winner.

- He's gonna have over $114 million.

Wow, how does that sound?

- These lucky ducks who just walked into tens of millions of dollars like how much am I gonna get tomorrow night when my numbers are picked?

It's just sort of manifesting you know in our little scenario, remember that they had advertised $67 million and that really it was $40 million that was allocated to the winner.

How does that all work out?

That is because when you win the jackpot you can get it in two different ways.

You can get it all at once or you can get it slowly over the course of 29 years.

If you get the cash all at once then the government immediately takes out 24% of federal taxes and then of course the state will get their taxes.

So like here in DC it's like 9.75% that's taken off.

So even though you were advertised 67 million the actual jackpot was the 40 million.

So really you walk away with about 26 million bucks.

The reason it was advertised as 67 million is because of the other option.

If you take it slowly over the course of 29 years then the government holds onto that money and invests it in like bonds and it gains interest.

And they project that over that time it will actually be a total payout of $67 million.

That also gets taxed a bunch of ways and whatever.

And eventually you end up with about 43 million if you do the over time.

So 26 million versus $43 million depending on if you take it all at once or take it over time.

The point is that once again, even with the winner the government makes a lot of money off of lotteries and this is the number that should blow all of our minds.

The US federal and local lottery revenue in 2020 was around $27 billion.

$27 billion in government revenue because of the lottery.

And this is kind of where it feels a little messed up because I thought we already had a way of funding the government.

Isn't that just called taxes?

- Look we got the Powerball number, we won $3.

- Wow, you think we should get that over 20 years ago for the big payout.

- Hello America, I'm Tom Crow, it is Tuesday, January 17th for tonight's $20 million to win the jackpot you must match these five plus that gold mega ball.

Now let's see if I can make you a millionaire tonight.

- Nah, I already lost this, (bleep) this.

Back to the video.

So now we can answer this question.

Why does the government run a gambling scheme?

And it boils down to this, lotteries were illegal in the United States for a very long time.

Public opinion was very against them.

But then in the sixties, New Hampshire needed money.

At the time they didn't have a sales tax or an income tax.

They were running low on tax revenue to fund their schools.

So they passed a law that allowed them to start a sweepstakes to raise funds for their schools and it kind of worked.

They made money.

I mean presumably, right?

Like and then other states were like, wait a minute we can make taxes into a fun game and no one will get mad at us?

And the answer is, yes you can.

It's called the lottery.

And so a bunch of other states started to adopt it and now we're headed into an era that is characterized by lower and lower taxes.

- By lowering everyone's tax rates all the way up the income scale, each of us will have a greater incentive to climb higher to excel to help America grow.

- Taxes have never been popular, but this was a time when taxes really started to hit a new low.

So after years of being illegal the lottery is back and it is back with a vengeance.

Soon you have these multi-state national lotteries and the government starts to make millions and then billions of dollars of tax revenue, revenue that they weren't getting from just boring old taxes.

Okay, so the lottery is just another tax but who ends up paying these fun voluntary taxes?

The people who pay them are the ones who don't really have the means to.

Poorer and less educated people are the ones who play the lottery most.

- The lottery is mostly a tax on people who don't know math.

- The lottery ends up as a tax on those who can least afford it.

- It's a tax on the poor - But most of that money is spent by low income consumer.

- In South Carolina, one report found that people who make less than $35,000 a year spent more than double on lottery tickets than people who make over $100,000 a year.

Let that sink in for a second, double.

They also found that people of color are more likely to buy lottery tickets than white players.

One study found that in almost every state whether it's by design or not, neighborhoods that have lottery retailers have a higher poverty rate than neighborhoods that don't have lottery retailers.

Remember, this is the free market.

These retailers are following the demand.

So yeah, you start to see a picture of the government using the desperation of those who are less educated to generate revenue that they don't get from boring old regular taxes.

And then I think the moment that actually gets me here is that that money that revenue goes to fund things that isn't often beneficial to the poorer communities that bought the tickets and paid the taxes.

So yeah, that is the lottery.

The question is why do we keep doing this?

And again, it goes back to that very shrewd economic argument.

Humans love gambling, they're gonna do it anyway.

Why not just regulate it and make some extra revenue out of it?

But as always, there's some private interests here too keeping this all alive.

Who prints all of these, right?

Who makes the latex that goes on the little scratch off?

Those are companies that make a lot of money off the lottery and they actually have lobbyists keeping the lottery alive.

So yeah, the lottery exists and will probably always exist.

I mean, humans love gambling and taxes exist and are necessary.

We need to fund our government, but do we need to run a gambling scheme to raise those taxes?

The specific way that the government runs the lottery today is a regressive tax on the poor.

It raises money and it sends that money to places that doesn't benefit the people who are funding that tax.

And so when we see that gambling funds education or goes to good causes, to me that just feels misleading.

We just need to call it what it is.

The lottery is a tax on the poor.

(slow music) All right, another video is in the hopper, the lottery.

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