Economists Predict Higher Sin Taxes Will Affect Ohio Markets

Recently, Ohio Gov. Mike DeWine proposed an increase in sports betting taxes, marking another tax hike after the state already doubled its betting tax in 2023. The latest push seeks to generate funds for sports facilities across the state, among other initiatives.

Experts Agree Increase in Gambling and Cannabis Taxes May Decrease the Harmful Effect

Estimates suggest that a potential tax hike may generate an extra $130 million in Ohio. The previous time the state increased its betting tax saw them jump from 10% to 20%. But now, another doubling of those taxes to a whopping 40% is proposed.

In addition to sports betting, lawmakers are debating the increase of tobacco and marijuana taxes at a time when Gov. DeWine’s proposed budget needs to pass ahead of the end of June. While the discussions on the proposed tax hikes continue, experts are divided when it comes to the impact of raising taxes.

While some fear the potential negative impact of a tax hike on gambling, tobacco and cannabis, they stand united around the idea that harmful effects associated with such activities would be decreased thanks to higher taxes.

That’s the case for an overwhelming majority of economist experts who debated the topic as a part of a recent survey by Scioto Analysis. The new survey explains: “15 of 17 economists agreed that increasing taxes on cannabis, gambling, and tobacco will help reduce the negative externalities associated with those markets.”

According to Michael Jones from the University of Cincinnati, higher taxes on tobacco and cannabis are expected to decrease the “overall usage of these products among low-income households.” He also pointed to the important health benefits of eliminating tobacco use which leads to “better health outcomes and quality of life.”

Kay Strong, an expert economist, spoke about gambling, tobacco and cannabis, acknowledging that such products “have low price elasticity of demand.” Elaborating further, he predicted that a potential tax rate increase, or growing the “price,” may result in an insignificant decrease in the demand but “a large revenue return for the government.”

High Taxes May Push Some Consumers to Unregulated Markets

On the other hand, Will Georgic, a professor at Ohio Wesleyan University, acknowledged the potential downside of increasing the so-called sin taxes. “The only consideration that keeps me from “strongly agreeing” with this statement is if the taxes are high enough to push this type of consumption into unregulated markets,” he explained.

Georgic predicted that the consumption of legal cannabis and gambling, as well as tobacco, is expected to decrease. However, he questioned whether or not the tax hikes would be high enough to push some consumers into unlawful activities.

The expert’s opinion isn’t surprising, considering that some markets, across Europe for example, have exhibited decreases in channelization to the legal gambling sector as a result of draconian regulations. Still, such predictions are not 100% guaranteed just like the future of the proposed tax hikes is uncertain as it faces bipartisan opposition.