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Lotto nothing? The budgetary impact of state lotteries

  • Stephen Fink
  • Alan Marco
  • Jonathan Rork

Lottery revenues are often touted as an independent revenue source for states. Using 32 years of state financial data, the fallacy of such thinking is demonstrated. Being the first to control for the self-selection of being a lottery state, it is found that overall tax revenues decline with increased lottery sales. Moreover, it is discovered that this decline is driven by a decrease in revenues from general sales and excise taxes, which is only partially offset by increases in income tax receipts. Such findings are attributed to a combination of behavioural and political responses following the lottery's implementation.

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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 36 (2004)
Issue (Month): 21 ()
Pages: 2357-2367

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Handle: RePEc:taf:applec:v:36:y:2004:i:21:p:2357-2367
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  1. Timothy Besley & Anne Case, 1994. "Unnatural Experiments? Estimating the Incidence of Endogenous Policies," NBER Working Papers 4956, National Bureau of Economic Research, Inc.
  2. O. Homer Erekson & Glenn Platt & Christopher Whistler & Andrea Ziegert, 1999. "Factors influencing the adoption of state lotteries," Applied Economics, Taylor & Francis Journals, vol. 31(7), pages 875-884.
  3. 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.
  4. Rork, Jonathan C., 2003. "Coveting Thy Neighbors' Taxation," National Tax Journal, National Tax Association, vol. 56(4), pages 775-87, December.
  5. Kearney, Melissa Schettini, 2005. "State lotteries and consumer behavior," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2269-2299, December.
  6. Mikesell, John L., 1994. "State Lottery Sales and Economic Activity," National Tax Journal, National Tax Association, vol. 47(1), pages 165-71, March.
  7. Alm, James & McKee, Michael J. & Skidmore, Mark, 1993. "Fiscal Pressure, Tax Competition, and the Introduction of State Lotteries," National Tax Journal, National Tax Association, vol. 46(4), pages 463-76, December.
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