Abstract
Abstract Gambling has experienced rapid growth in recent decades, marked by the legalization of heretofore forbidden games and increasing rates of participation among households. This legalization is invariably accompanied by both regulation and taxation. Governments collect excise tax revenue from gross revenue (e.g. slot machines and casino gambling tables) or gross wager (e.g. lotteries). Overall, gambling products tend to be subject to quite high implicit or explicit rates approximating those on tobacco and alcohol. While the joint legalization and taxation probably conveys net welfare gains (net gamblers are better off), the legalization nevertheless imposes some external costs (compulsive gamblers, particularly of gaming machines, are worse off). The incidence of gambling taxes is usually regressive. The taxation of gambling is bound up with other policy issues relating to society’s attitude towards gambling. A middle ground is to accommodate the existing, unstimulated demand for gambling, without doing anything to stimulate that demand. Besides limiting the availability of gambling opportunities, this approach would be consistent with differentially higher tax rates.
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