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The Responsiveness of Casino Revenue to the Casino Tax Rate
Author(s) -
Combs Kathryn L.,
Kim Jaebeom,
Landers Jim,
Spry John A.
Publication year - 2016
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/pbaf.12106
Subject(s) - tax rate , economics , sales tax , tax revenue , revenue , ad valorem tax , tax reform , monetary economics , labour economics , public economics , finance
This paper examines the tax base elasticity of the regulated casino industry in Illinois to help estimate state‐level revenue impacts of casino tax rate changes. Illinois’ shift to a graduated rate schedule increased the highest marginal tax rate on casino adjusted gross receipts (AGR) from 20 percent to 70 percent before reverting to a 50 percent rate. We construct a state‐level casino tax rate variable, which is a statewide average for each month of the marginal casino tax rate facing each casino. We find that a 1 percent increase in this state‐level casino tax rate decreases overall Illinois casino AGR by around 1.1 percent.