Are Taxes on Lotteries Too High?

those lotteries was to raise revenues.' The state retains the portion of the total receipts from sales of lottery tickets that is not paid out as prizes or administrative expense. In 1983 this implicit tax on lottery wagering yielded over $2.1 billion in net state revenues. The implicit tax rates for lottery wagering are extremely high, averaging about 48% nationwide and ranging from a low of 43% to a high of 56%. Previous research suggests that the implicit tax rate on parimutuel horserace betting that maximizes tax revenues is less than half the tax rate that states levy on lotteries.2 Do greedy tax rates discourage lottery sales to the point where state officials interested in raising revenues should lower these tax rates?