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Audit: Georgia foregoes millions in state revenue by not taxing lottery tickets

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(The Center Square) — Georgia will forego roughly $229.8 million in state revenue in fiscal 2024 by not taxing lottery tickets, an amount that will likely increase to $304.8 million in 2033.

That’s the finding of a newly released audit conducted in the wake of Senate Bill 6, the Tax Credit Return on Investment Act of 2021. The audit revealed that forgone state revenue will likely total more than $2.6 billion over 10 years from 2024 to 2033.

The audit explores what would happen if Georgia taxed lottery tickets. If the government collected state and local sales tax, the audit indicates the lottery might sell roughly 7.6% fewer tickets, “assuming unitary price elasticity of demand.”

“For every $1 in state sales tax exempted from lottery ticket sales, $0.87 in value-added impact accrues to the state’s economy,” the audit found. “In the case of the alternate use of forgone revenue, for every $1 in sales tax on lottery tickets collected and spent by the state, $1.33 in value-added impact accrues to the state’s economy.”

The Lottery for Education Act in 1992 established the lottery in Georgia. The Georgia Lottery Corporation began ticket sales on June 29, 1993, and the state has never taxed lottery tickets.

All states except Alabama, Alaska, Hawaii, Nevada and Utah have lotteries. According to the audit, Georgia ranked seventh nationwide for gross lottery sales in 2022.

“Unlike most other tax incentives in Georgia, undertaken to create jobs or bolster a key industry, the sales tax exemption on lottery tickets was created specifically to fund education—specifically the HOPE scholarship and pre-K slots,” the audit found. “The sales tax exemption on lottery tickets results in higher ticket sales—increasing education funding by an estimated $1.44 billion from 2024 to 2033. Since state law views lottery tickets as the purchase of a chance to win—not property—sales tax was never imposed on them.”

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