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Booms, Busts, and Gambling: Can Gaming Revenues Reduce Budget Volatility?

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Executive Summary

Over the past 20 years, state and provincial governments in North America have expanded legal gambling opportunities to consumers. One of the primary policy goals of this expansion of gambling opportunities has been to increase government revenues. Gambling is an attractive source of new government revenues because consumers are relatively insensitive to the implicit "Tax" rate imposed on gambling activities and gambling is a voluntary activity; only those who chose to gamble are subject to this implicit tax. In this paper, the authors document the contribution that gambling revenues make to state and provincial tax receipts, and the extent to which variation in gambling revenues contributes to the volatility of tax revenues over time. They adopt an approach from the finance literature.

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