1 Gaming, States and Tax Revenues—The Tortoise or the Hare: A CGE Comparative Assessment of Casino Resorts and Racinos

ABSTRACT. State tax revenues from casinos as a share of total state gaming revenues generally correlate well with the year of legalization. Theoretically speaking, heavy tax rates should dampen growth of the casino revenues in states that adopt them. Indeed, states with lower tax rates tend to have larger gaming revenue streams. Since they enable more investment, lower tax rates should enable more jobs and income to be generated directly by the gaming industry. Using a detailed self-made computable general equilibrium model for the 2010 economy, we evaluate the effects of a racino in New Jersey that is taxed at a rate similar to casinos in Pennsylvania. It is assumed a consumer capture rate for the casino that is similar to that in Pennsylvania. We find that the state definitely gains from the entry of such a racino