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Tortoise and the Hare Revisited? A CGE Analysis of Gaming and State Tax Revenues:

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  • Michael Lahr

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  • Maria Alvarez

Abstract

State tax revenues from casinos as a share of total state gaming revenues generally correlate well with the year of legalization. The share ranges from about 8.0 percent in Nevada, the first state to legalize gambling, to 47.4 percent in Pennsylvania, one of the most recent state to legalize gambling. As a result, even though Nevada's agglomeration of gaming remains the largest within the U.S., its direct state revenues from that industry are now dwarfed by those of recent state entrants. Theoretically speaking, such heavy tax rates should dampen growth of the casino revenues in states that adopt them. Indeed, states with lower tax rates do, in fact, tend to have larger gaming revenue streams: This suggests more jobs and income are generated directly by the gaming industry when lower tax rates are applied. This paper, therefore, probes the size of the indirect economic activity that would have to be generated through spending of casinos on state-based labor and vendors in order to offset the benefits states could obtain if they simply applied a higher direct tax rate on gaming. This issue is examined through the lens of the New Jersey casino resort industry.

Suggested Citation

  • Michael Lahr & Maria Alvarez, 2013. "Tortoise and the Hare Revisited? A CGE Analysis of Gaming and State Tax Revenues:," ERSA conference papers ersa13p191, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa13p191
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    File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa13/ERSA2013_paper_00191.pdf
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    References listed on IDEAS

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    4. Álvarez-Martínez, María Teresa & Polo, Clemente, 2012. "A general equilibrium assessment of external and domestic shocks in Spain," Economic Modelling, Elsevier, vol. 29(6), pages 2486-2493.
    5. Walker, Douglas M. & Jackson, John D., 1998. "New Goods and Economic Growth: Evidence from Legalized Gambling," The Review of Regional Studies, Southern Regional Science Association, vol. 28(2), pages 47-70, Fall.
    6. Peter Calcagno & Douglas Walker & John Jackson, 2010. "Determinants of the probability and timing of commercial casino legalization in the United States," Public Choice, Springer, vol. 142(1), pages 69-90, January.
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