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The Cross Effects of Lottery Taxes On Alternative State Tax Revenue

Author

Listed:
  • Mary O. Borg

    (University of North Florida)

  • Paul M. Mason

    (University of North Florida)

  • Stephen L. Shapiro

    (University of North Florida)

Abstract

This article both theoretically and empirically identifies sizable cross effects of lottery taxes on other sources of state tax revenue. Specifically, those states without income taxes and those with high sales and excise tax rates may lose as much as 23 cents in alternative state revenue for every dollar of lottery revenue they collect. Even though this extreme still implies that the state receives 77 cents more tax revenue than before the lottery was imposed, those states that earmark their lottery dollars likely see significant reductions in their nonlottery revenue sources that need to be accounted for in their budgets. Otherwise, a bonanza in one area of the budget causes a sizable and likely unexpected shortfall elsewhere.

Suggested Citation

  • Mary O. Borg & Paul M. Mason & Stephen L. Shapiro, 1993. "The Cross Effects of Lottery Taxes On Alternative State Tax Revenue," Public Finance Review, , vol. 21(2), pages 123-140, April.
    • Handle: RePEc:sae:pubfin:v:21:y:1993:i:2:p:123-140
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    Cited by:

    1. Di Bella, Enrico & Gandullia, Luca & Leporatti, Lucia, 2015. "The Impact of Gambling on Government Budget: A European Comparison with a Focus on Italy - L’impatto del gioco d’azzardo sul bilancio dello stato: un confronto europeo e analisi del contesto italiano," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 68(2), pages 187-212.
    2. Andrew Worthington & Kerry Brown & Mary Crawford & David Pickernell, 2007. "Gambling participation in Australia: findings from the national Household Expenditure Survey," Review of Economics of the Household, Springer, vol. 5(2), pages 209-221, June.
    3. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: An Annotated Bibliography," Working Papers 1110, College of the Holy Cross, Department of Economics.
    4. Andrew C. Worthington & Kerry Brown & Mary Crawford & David Pickernell, 2003. "Socioeconomic And Demographic Determinants Of Household Gambling In Australia," School of Economics and Finance Discussion Papers and Working Papers Series 156, School of Economics and Finance, Queensland University of Technology.
    5. Kearney, Melissa Schettini, 2005. "State lotteries and consumer behavior," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2269-2299, December.
    6. Thomas A. Garrett, 2011. "A closer look at the tax incidence of instant lottery games: an analysis by price point," Working Papers 2011-010, Federal Reserve Bank of St. Louis.
    7. Pantuosco, Louis & Seyfried, William & Stonebraker, Robert, 2007. "The Impact of Lotteries on State Education Expenditures: Does Earmarking Matter?," The Review of Regional Studies, Southern Regional Science Association, vol. 37(2), pages 169-185.
    8. Garrett, Thomas A. & Coughlin, Cletus C., 2009. "Inter–Temporal Differences in the Income Elasticity of Demand for Lottery Tickets," National Tax Journal, National Tax Association;National Tax Journal, vol. 62(1), pages 77-99, March.
    9. Melissa S. Kearney, 2005. "The Economic Winners and Losers of Legalized Gambling," NBER Working Papers 11234, National Bureau of Economic Research, Inc.
    10. Stephen Fink & Alan Marco & Jonathan Rork, 2004. "Lotto nothing? The budgetary impact of state lotteries," Applied Economics, Taylor & Francis Journals, vol. 36(21), pages 2357-2367.
    11. Thomas A. Garrett & Natalia A. Kolesnikova, 2010. "Local price variation and the tax incidence of state lotteries," Working Papers 2010-035, Federal Reserve Bank of St. Louis.

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