The price of a lottery ticket consists of two components, the production cost
of the ticket and an excise tax. This tax is an approximately constant proportion of ticket price and is fully shifted to the consumer. Hence the ratio of tax
to income is a multiple of the expenditures-income ratio. Data from the
Pennsylvania state lottery were used to estimate the relationships between
lottery expenditures and income, age, race, education, and city residence. It
is concluded that the excise tax on lotteries is moderately regressive, representing much less than one percent of income at all income levels.
Get full access to this article
View all access options for this article.
References
1.
Aronson, J.R. , A. Weintraub, and C. Walsh (1972) "Revenue potential of state and local lotteries."Growth and Change3 (April): 3-8.
2.
Brinner, R.E. and C.T. Clotfelter (1975) "An economic appraisal of state lotteries."National Tax J.28 (December): 395-404.
3.
Business Week (1975) "The economic case against state-run gambling." (August 4): 67-68.
4.
Handa, J.C. (1971) "A theory of risk preference in gambling."J. of Pol. Economy79 (July/August) 1073-1083
5.
Kaplan, L.J. and J.M. Maher (1970) "The economics of the numbers game."Amer. J. of Economics and Sociology29 (October): 391-408.
6.
Kim, Y.C. (1973) "Choice in lottery insurance: augmented-income approach."Q. J. of Economics87 (February): 148-156.
7.
Kinsey, R.K. (1963) "The role of lotteries in public finance."National Tax J.16 (March): 11-19.
8.
New Jersey State Lottery Planning Commission ( 1970) Report.
9.
Pechman, J.A. and B.A. Okner (1974) Who Bears the Tax Burden?Washington, DC: Brookings Institution.
10.
Pennsylvania Bureau of State Lotteries (1972 ) Survey of Lottery Consumers (unpubhshed)
11.
Spiro, M.H. (1974) "On the tax incidence of the Pennsylvania lottery."National Tax J.27 (March): 57-61.
12.
U.S. Bureau of the Census (1970) Fourth Count Summary TapesWashington, DC: Government Printing Office.
13.
Watson, R.D. (1973) "Lotteries: can the public and state both win?"Federal Reserve Bank of Philadelphia Business Rev. (July): 3-14.
