Gambling Taxes
Doug Walker
College of Charleston
85th Annual Meetings, Southern Economic Association
Session on Taxing More Choice
21 November 2015
Background
• Lottery
–
–
–
–
First modern lottery in NH, 1964
Now all but 6 states (AL, AK, HI, MS, NV, UT)
Many earmark revenues for “good causes”
Designed to maximize revenue (Garrett 2001)
• Casinos
– NV, 1931; NJ, 1978; recent spread started 1989
– Now about 1,000 casinos in U.S.
• Half owned by sovereign Indian tribes
– Early motivation was tourism, tax revenues
– Recent motivation is “defensive” – tax revenues
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Gaming taxes
• Lottery “tax” is about 30%
– 20% admin./commissions
– 50% paid back in prizes
• Casino tax varies by state
– Low of 6.75% in NV
– High of 55% in PA, and slots higher in DE, NY
– States with lower taxes have higher levels of
capital investment
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Figure 1. Total lottery sales, all states, 2000-13
64,000
Lottery sales (millions $)
59,000
54,000
49,000
44,000
39,000
34,000
Fiscal Year
Data source: LaFleur’s Magazine, 2009-13; LaFleur’s World Lottery Almanac 17e, 1993-2008
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Figure 2. Total government (“tax”) revenues from lottery sales, all states, 2000-13
23,000
Government revenues ($ millions)
21,000
19,000
17,000
15,000
13,000
11,000
Fiscal Year
Data source: LaFleur’s Magazine, 2009-13; LaFleur’s World Lottery Almanac 17e, 1993-2008
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Figure 3. Total casino revenues, all states, 2001-14
38,000
Casino revenues (millions $)
36,000
34,000
32,000
30,000
28,000
26,000
Year
Data source: UNLV Center for Gaming Research, http://gaming.unlv.edu/
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Figure 4. Total state government revenues from casino taxes, all states, 1998-2011
9,000
Government revenues (millions $)
8,000
7,000
6,000
5,000
4,000
3,000
2,000
Year
Data source: UNLV Center for Gaming Research, http://gaming.unlv.edu/
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Gaming taxes, cont.
• Overall, state revenues from gambling taxes
are small, less than 5% in most states
• Provides relief from “fiscal stress”
– Don’t have to raise other taxes as much
– Don’t have to cut spending
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Issues for concern
• Inter-industry relationships
– Casinos and lotteries are substitutes
• Walker & Jackson (2008)
• MD study showed -5% impact of casinos on lottery
– Net tax effect of additional gambling is positive
• Taxed higher than any other industry
• Market “saturation”
– Not well-defined, but a concern, esp. in NE
– Particular state may not care about regional
saturation
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Issues, cont.
• Social issues
– Social costs of gambling are difficult to estimate
– Crime, divorce, suicide, bankruptcy
– May have implications for public budgets,
depending on social programs
• Public choice issues
– Artificial restriction of supply => rents
• NH free market model would be interesting
– Link between casino legalization and corruption
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Technology & the future
• Online poker & lottery face uncertain futures
– Wire Act ‘reinstatement’
• Sports betting, limited legality
• Daily fantasy sports has exploded
– Banned in NY as online gambling
– Attracting state and federal regulatory attention
• Difficult for govt to keep pace with technology
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Conclusion
• During past 2 decades, legal gambling has been a
popular tool of public finance
• Tax revenue value may decline as availability
expands
– Free games on phones
– Online gambling supplied from abroad
• Industry is beginning to adapt to changing
landscape
• Some governments have begun considering
changing tax rates to account for increased
competition
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Contact information
Doug Walker
Professor of Economics
College of Charleston
66 George Street
Charleston, SC 29424
[email protected]
WalkerD.people.cofc.edu
(843) 953-8192
International
Gambling
Studies
Routledge
Publication Frequency: 3 issues per year
2014 Impact Factor: 1.288
ISSN: 1445-9795 (Print), 1479-4276 (Online)
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