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The Impact of Video Gaming Terminals on Casinos and State and Local Tax Revenue

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  • Erin Hazel Phipps
  • Mark W. Nichols
  • Federico Guerrero

Abstract

In 2012, Illinois passed legislation allowing video gaming terminals (VGTs) outside of casinos. This legislation was passed to increase tax revenues from gambling in a market that had seen decreases in revenues and admissions over the past 8 years. VGTs may substitute for casino gambling and have a negative impact on casino and tax revenue. Using ordinary least squares and vector autoregressive models, we find that casino slot revenues decrease by about 0.05 percent for each 1 percent increase in VGT revenues. Admissions decrease by about eleven people per VGT. A Granger causality test suggests causation is running from VGTs to admissions. Thus, there is substitution between VGTs and casino gambling but not so large as to reduce tax revenue. Overall tax revenue from gambling, both casino and VGT, has increased for Illinois. However, local communities where casinos are located have experienced declines in casino tax revenue that have exceeded the gains from VGT revenue.

Suggested Citation

  • Erin Hazel Phipps & Mark W. Nichols & Federico Guerrero, 2020. "The Impact of Video Gaming Terminals on Casinos and State and Local Tax Revenue," Public Finance Review, , vol. 48(5), pages 650-675, September.
    • Handle: RePEc:sae:pubfin:v:48:y:2020:i:5:p:650-675
    DOI: 10.1177/1091142120945684
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    References listed on IDEAS

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    1. Ryan M. Gallagher, 2014. "An Examination of Cannibalization Effects within the Riverboat Gaming Industry: The Case of Illinois-Area Casinos," Growth and Change, Wiley Blackwell, vol. 45(1), pages 41-59, March.
    2. Douglas M. Walker & Todd M. Nesbit, 2014. "Casino Revenue Sensitivity to Competing Casinos: A Spatial Analysis of Missouri," Growth and Change, Wiley Blackwell, vol. 45(1), pages 21-40, March.
    3. David Paton & Leighton Vaughan Williams, 2013. "Do New Gambling Products Displace Old? Evidence from a Postcode Analysis," Regional Studies, Taylor & Francis Journals, vol. 47(6), pages 963-973, June.
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    Cited by:

    1. Gary A. Wagner & Douglas M. Walker, 2021. "Did video gaming expansion boost municipal revenues in Illinois?," Southern Economic Journal, John Wiley & Sons, vol. 88(2), pages 649-679, October.

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