Economic Background for Gambling Policy

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Abstract
Legalized gambling as a revenue source is evaluated on the basis of data derived from a nationwide survey. The major findings include: (1) gambling is essentially a consumer commodity which people purchase because they enjoy it, rather than because they expect to make money; (2) maximum revenue potential depends on consumer responsiveness to the price of a given game; (3) high take‐out rates encourage gamblers to participate in illegal substitutes; (4) state receipts from gambling, regardless of the details of the way they are collected, are economically identical to any other form of excise tax; (5) although gambling outlays tend to increase with income, the amount of increase is disproportionate to the amount of income, and therefore gambling tends to be a highly regressive form of taxation; and (6) the maximum revenue which states could expect to collect as the result of legalizing gambling is about a 4 percent addition to total receipts from other sources of revenue.

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