Abstract
Critics of Indian gaming contend that reservation casinos have a negative impact on state economies. This paper tests the hypothesis that the introduction of Indian casinos caused a structural change in the formation of Arizona state revenues. Data are from Maricopa County, the largest county in Arizona. Findings suggest that Indian casinos may divert funds from taxable to non‐taxable sectors. The growth in tax revenue from non‐gaming sectors of the economy has masked these displacement effects. However, given the trend toward increasing the proportion of state funds from sales taxes, a diminution in the rate of economic growth could have serious implications for future state budgets.
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