The effects of casino gambling on state tax revenue


A theoretical model of state tax structure implies that revenue enhancement due to the introduction of casino gambling is less likely in states where incomes taxes do not exist and where casino tax rates are lower than the corresponding tax rates on sales taxable and excise taxable goods. Further, it is clear that casino gambling is likely to adversely impact lottery tax revenues earmarked for education. Due to the cross-price effects of gambling, tax revenues will likely decline in states that introduce nontaxable casino gambling on Indian reservations. In the longer term, as casino gambling proliferates increasing competition among states, there will be negative revenue consequences due to fewer tourism and employment dollars.

This is a preview of subscription content, access via your institution.


  1. Bonham, Carl; Fujii, Edwin; Mak, James. "The Impact of the Hotel Room Tax: An Interrupted Time Series Approach,"National Tax Journal, 45, 4, December 1992, pp. 433–41.

    Google Scholar 

  2. Borg, Mary O.; Mason, Paul M.; Shapiro, Stephen L.The Economic Consequences of State Lotteries, New York, NY: Praeger Publishers, 1991.

    Google Scholar 

  3. __. "Net State Lottery Tax Revenue," in William R. Eadington; Judy Cornelius, eds.,Gambling and Commercial Gaming: Essays in Business, Economics, Philosophy and Science, Reno, NV: Institute for the Study of Gambling and Commercial Gaming, 1992.

    Google Scholar 

  4. "The Business Week 1000,"Business Week, March 27, 1995, pp. 104–65.

  5. Clotfelter, Charles T.; Cook, Phillip J.Selling Hope: State Lotteries in America, Cambridge, MA: Harvard University Press, 1989.

    Google Scholar 

  6. Grinols, Earl L. "Bluff or Winning Hand? Riverboat Gambling and Regional Employment and Unemployment,"Illinois Business Review, 51, 1, Spring 1994, pp. 8–11.

    Google Scholar 

  7. McGrath, Brian. "Economic Effects of a Lottery in Idaho," working paper, Boise State University, September 1986.

  8. Suits, Daniel B. "Gambling Taxes: Regressivity and Revenue Potential,"National Tax Journal, 30, 1, March 1977, pp. 19–35.

    Google Scholar 

Download references

Author information



Rights and permissions

Reprints and Permissions

About this article

Cite this article

Mason, P.M., Stranahan, H. The effects of casino gambling on state tax revenue. Atlantic Economic Journal 24, 336–348 (1996).

Download citation


  • Theoretical Model
  • Longe Term
  • International Economic
  • Revenue Enhancement
  • Public Finance