Horizontal Equity Implications of the Lottery Tax

Based on Musgrave's traditional definition of horizontal equity, this paper estimates whether the lottery tax results in a differential tax burden by race, educational attainment, or age within households that have equal economic positions. A second question that is addressed is whether lottery advertising intensifies any horizontal inequities that exist. Indeed, this study finds that, among individuals with otherwise identical characteristics, African Americans bear a significantly higher lottery tax burden. Other minority groups and individuals with the lowest educational attainment also bear a larger lottery tax burden, although the difference is not significant at the ten percent level. In addition, the results suggest that lottery advertising has its greatest impact on African Americans, thus intensifying the horizontal inequity of the lottery tax and resulting in a greater tax burden for African Americans as compared to identical Caucasians.