A primary rationale for the legalization of almost any form of gambling has been the anticipation of government revenues derived from special taxation on the gambling activities. Proponents of gambling often argue that “since people gamble anyway”, the activity should be legalized so that it can be taxed. Persons opposed to gambling might dispute the premise that there is “gambling anyway”, and they claim that even where there is legalization, the amount of tax revenue gained is in most cases only a small part of a government’s budget. It is also argued that the legalization efforts will result in increased gambling, as government actors will begin to rely upon gambling revenues, whatever their amount, and they will therefore encourage the activity. This is especially the case where the gambling is conducted as a government enterprise (e.g., state and provincial lotteries). Increased gambling can have a depressing effect upon other tax revenues when the gambling products are substitute purchases replacing the sale of other goods, which would also be taxed. Mindful of these arguments, when Great Britain legalized commercial casinos in 1968, the nation purposely provided that there would be no special casino taxes. The government simply did not want government officials to have an incentive for allowing the activity to increase.
Additional issues concerning the taxation of gambling revolve around the “fairness” of the taxes. Critics ask: Do the taxes fall most heavily upon poor people, or upon people who can afford to pay more taxes? Of course, proponents of gambling emphasize that taxation in this case is “voluntary”.
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