The State Lottery Is a Tax That Only the Poor Pay

Mifal HaPayis is Israel's state lottery. It is presented as a public benefactor: the money goes to schools, community centres, sports halls, and the buildings carry its logo so that everyone can see where the money went. I want to describe the same institution from the other end, where the money comes from, because from that end it is a tax, and a tax of a kind that no legislature would dare pass by name.

What a Tax Is

A tax is money the state takes from the public to fund public goods. The lottery takes money from the public and funds public goods. The intermediate step, the draw, changes nothing about the flow: most of what goes in never comes back out to the people who put it in, and the difference is what builds the community centre.

The only question is who pays. And here the lottery differs from every other tax on the books.

Income tax is progressive: the more you earn, the higher the rate. Value-added tax is roughly flat: everyone pays the same share of what they spend. The lottery runs the other way. The people who buy lottery tickets are, overwhelmingly, the people with the least money. This is not a slur; it is the observed pattern wherever lotteries are studied, and the reason is not stupidity. A lottery ticket is the only asset a poor person can buy that has any chance, however small, of changing his life. A rich person does not need the ticket. He already has the life.

So the lottery is a regressive tax: its rate is highest on the lowest incomes and falls toward zero as income rises. No finance minister could stand up and propose that. The lottery does it every week.

The Voluntary Defence

The reply is that nobody is forced to buy a ticket. That is true and it does not help.

Nobody is forced to buy cigarettes either, and we tax them precisely because people who are hooked will pay. A tax on a compulsion is still a tax, and calling it voluntary describes the legal form of the transaction, not its economics. The state knows exactly who will buy the tickets. It advertises to them. It places the kiosks where they live. The revenue is forecast in budgets years in advance, which is not how you treat money you think people might freely decide not to hand over.

A tax you can avoid in principle but do not avoid in practice, and whose collection is planned around your not avoiding it, is a tax.

The Benefactor Illusion

Now look at where the money goes, because the destination completes the trick.

The lottery funds things that ordinary taxation should fund and, in a decent state, would. When a school gets a new building with the lottery's logo on it, the public reads this as generosity. What has actually happened is that the treasury has been spared an expense, the expense has been shifted onto the poorest residents of the town through ticket sales, and the shift has been branded as a gift.

The logo is doing work. It converts a regressive tax into an act of philanthropy in the mind of everyone who walks past, including the people who paid for the building one ticket at a time.

Why It Persists

I once had a long conversation with a lottery salesman who agreed with everything above and kept selling. That is not an anomaly. It is the mechanism.

The lottery persists because everyone with the power to end it benefits from it. The treasury gets revenue without a vote. Municipalities get buildings without raising rates. The organisation itself employs thousands. The politicians get ribbons to cut. The only party to the arrangement who loses is the ticket buyer, and he is the one party with no organisation, no lobby, and a purchase he half-knows is a mistake, which makes him unlikely to protest on his own behalf.

What Honesty Would Look Like

I am not arguing that lotteries should be illegal. People will gamble, and a state monopoly on it is probably better than the alternatives.

I am arguing for a change of description. Every public building funded by the lottery should say so accurately: not "a gift of Mifal HaPayis" but "paid for by lottery tickets, bought mainly by the poorest residents of this town." Every budget line that relies on lottery revenue should be listed as what it is, a regressive tax, next to the progressive ones.

That would not end the lottery. It would end the illusion, and it would make the next finance minister who wants to cut income tax at the top and let the lottery fill the hole explain, in public, whose money he is spending.