Can States Close Budget Deficits with Excise Tax Hikes?

Pandemic's deterioration of fiscal glance affects the source of all major municipalities. Historically, income tax has fluctuated greater than sales taxes and goods tax, and has decreased rapidly during the recession, but this decrease is the essentials of social distance, evacuation disciplines, and many unrelated businesses. It is special in that the closure has led to a sudden drop in personal consumption. Furthermore, products and offers with strong demand, such as food and digital entertainment, are most likely to be levied on local governments. Consumption tax is levied on retail sales of products and provided items, but this consumption tax should generally be applied to all final applications, except for the slight exception. Almost all governments are ta x-exempted with these products like grocery. The tax rate may be reduced by expanding the tax subject by connecting food. The consumption tax is necessary to eliminate the business between companies that become tax pyramids, despite being taxed.

Cost reduction is a tax imposed on a specific product or work form. Product tax is usually levied on cigarettes, distilled liquor, soft drinks, gasoline, insurance premiums, recreation, fare, and comparing the ratio of federal taxes, usually, a small amount, and a smaller degree. Small and variable. Home work and other travel regulations mean a significant tax reduction of special taxes for automotive fuel taxes and sightseeing and hotel services. The closure of facilities, such as casinos and bars, producing great profits from "sin tax", will also affect the state of revenue in the state [2].

The provided notes verify what is expected to be the benefits of goods tax, and argues why the increase in goods tax rates is not considered a powerful conclusion on the problem of economic distress. This note is composed of three parts: new information providers on trave l-related goods tax, sin, and goods tax. < SPAN> Finance deterioration due to pandemic affects the source of the interests of all major municipalities. Historically, income tax has fluctuated greater than sales taxes and goods tax, and has decreased rapidly during the recession, but this decrease is the essentials of social distance, evacuation disciplines, and many unrelated businesses. It is special in that the closure has led to a sudden drop in personal consumption. Furthermore, products and offers with strong demand, such as food and digital entertainment, are most likely to be levied on local governments. Consumption tax is levied on retail sales of products and provided items, but this consumption tax should generally be applied to all final applications, except for the slight exception. Almost all governments are ta x-exempted with these products like grocery. The tax rate may be reduced by expanding the tax subject by connecting food. The consumption tax is necessary to eliminate the business between companies that become tax pyramids, despite being taxed.

Revenue Decline

Cost reduction is a tax imposed on a specific product or work form. Product tax is usually levied on cigarettes, distilled liquor, soft drinks, gasoline, insurance premiums, recreation, fare, and comparing the ratio of federal taxes, usually, a small amount, and a smaller degree. Small and variable. Home work and other travel regulations mean a significant tax reduction of special taxes for automotive fuel taxes and sightseeing and hotel services. The closure of facilities, such as casinos and bars, producing great profits from "sin tax", will also affect the state of revenue in the state [2].

The provided notes verify what is expected to be the benefits of goods tax, and argues why the increase in goods tax rates is not considered a powerful conclusion on the problem of economic distress. This note is composed of three parts: new information providers on trave l-related goods tax, sin, and goods tax. Pandemic's deterioration of fiscal glance affects the source of all major municipalities. Historically, income tax has fluctuated greater than sales taxes and goods tax, and has decreased rapidly during the recession, but this decrease is the essentials of social distance, evacuation disciplines, and many unrelated businesses. It is special in that the closure has led to a sudden drop in personal consumption. Furthermore, products and offers with strong demand, such as food and digital entertainment, are most likely to be levied on local governments. Consumption tax is levied on retail sales of products and provided items, but this consumption tax should generally be applied to all final applications, except for the slight exception. Almost all governments are ta x-exempted with these products like grocery. The tax rate may be reduced by expanding the tax subject by connecting food. The consumption tax is necessary to eliminate the business between companies that become tax pyramids, despite being taxed.

Cost reduction is a tax imposed on a specific product or work form. Product tax is usually levied on cigarettes, distilled liquor, soft drinks, gasoline, insurance premiums, recreation, fare, and comparing the ratio of federal taxes, usually, a small amount, and a smaller degree. Small and variable. Homework and other travel regulations mean a significant tax reduction of special taxes for automobile fuel taxes and sightseeing and hotel services. The closure of facilities, such as casinos and bars, producing great profits from "sin tax", will still affect the state's revenue. [2]

The provided notes verify what is expected to be the benefits of goods tax, and argues why the increase in goods tax rates is not considered a powerful conclusion on the problem of economic distress. This note consists of three parts: new information providers on trave l-related goods tax, sin, and goods tax.

Extremely uncertainty criteria require that each state finds a way to balance budgets in the highest fiscal year. To do so, shor t-term fiscal dispatch quickly turns negative, so measures for each category are required. The prolonged the blockage, the longer the fiscal retreat, the longer the initial period of the retreat, but the more corporate cache decreases, and the supply chain is cut off, so that the company's revenue is actually the level before Coronavirus. Retirement becomes stronger. The destructive results of the decline have already shown the discouragement of the unemployment rate.

Hardest Hit Excise Categories

Pandemic of such a scale is an unprecedented event in modern times, and it is not easy to port financial results. Travel, entertainment, and hotel business industries have the opportunity to wait for the same results on September 11, but are also larger. The specific reaction in the buyer's actions has all the potential to increase the sluggish sector of these economies.

One of the methods that gives a certain context to the future decline is the suspension of support for the State Governor's Association. On April 11, Governor Rally Hogan (R-MD) and Governor Andrew Quuomo (D-NY) requested $ 500 billion to support the shortage of profits. This figure is to turn 56 % of tax revenues into the state arteline fund by 2020 of the economic year. [4]

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If you talk directly about the state tax revenue, from the first quarter of 2019 to the second quarter, each state is $ 26 billion in gasoline tax, $ 3 or $ 3 or $ 5 billion in formal alcohol tax, and $ 4 billion in installation tax on comfort. , Formally raised $ 9 billion (only $ 420, $ 5 billion) with formal tobacco tax. Depending on the period of freezing, any data on the main category of goods tax can have more or less effects. However, in limited monitoring, their 10 % reductions will lead to not actually receiving approximately $ 4, 25 billion. [5]

Air Traffic

Each state must find new income information providers as classical information providers are depleted. However, parliamentarians are excited to show a cautious attitude to the development of new product tax and raising the tax rate on existing costs. It is a lon g-term strategy for goods tax to freeze a part of profits when we realize that we are on the opposite side of business closure and deployment closure. It is unlikely to be successful.

The exceptional trave l-related tax source will be more delayed and more injured than other laps and politicians, due to the easing of the achievements aimed at suppressing the spread of Coronavirus.

There is no doubt that government revenues will decrease due to transportatio n-bearing bases, but how difficult it is to evaluate. AASHTO (American Association of State Officials on Road Transport), a representative of 50 states in the United States, has requested Congress to assign $ 50 billion to make up for the shortage of expected revenue. According to AASHTO's estimates, transportatio n-related income (forecasts for $ 111 billion in 2019), including road training camps, air tickets, automotive fuel taxes, and public vehicles, will decrease by 30 %.

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Although the future of international air transport and domestic air transport is still unclear, it is very likely that this crisis will affect private airlines for a long time. From early April, domestic air transportation decreased by about 40 %, and many airplanes were stuck. As a result, air ticket prices dropped 10 to 6 % yea r-o n-year. In the long run, the worsening travel is not only due to politics, but also because of consumer choices. For example, sightseeing in New York has not returned to the level until September 11 for five years.

Short-Term Lodgings

In 2019, the federal government raised nearly $ 16 billion from the item tax on tickets. This income is used for airports, objects, research, and funds for the Federal Civil Aviation Bureau (FAA).

The federal government imposes 7, 5 % of the goods tax on all internal flights. In addition, a section tax of $ 4, 20 per section is charged. Finally, the passenger pays the federal government on September 11, a $ 5, 6 0-way flight tax. [11]

Motor Fuel

Local airports can collect rates called PFC (PASSIER FACILITY Charge) to cover the maintenance and improvement of airports (almost all airports are collected). The size of PFC does not exceed $ 4, 50.

It is unlikely that air transportatio n-related goods tax and commissions will lead to significant income, and harm may be greater than profits. Aviation transportation can be away from normal work for years, and an increase in tax burden can stop the industry's ability to escape from crisis. < SPAN> There is no doubt that government revenue due to transportation based on use r-bearing bases will decrease, but how difficult it is. AASHTO (American Association of State Officials on Road Transport), a representative of 50 states in the United States, has requested Congress to assign $ 50 billion to make up for the shortage of expected revenue. According to AASHTO's estimates, transportatio n-related income (forecasts for $ 111 billion in 2019), including road training camps, air tickets, automotive fuel taxes, and public vehicles, will decrease by 30 %.

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Sin Taxes

Although the future of international air transport and domestic air transport is still unclear, it is very likely that this crisis will affect private airlines for a long time. From early April, domestic air transportation decreased by about 40 %, and many airplanes were stuck. As a result, air ticket prices dropped 10 to 6 % yea r-o n-year. In the long run, the worsening travel is not only due to politics, but also because of consumer choices. For example, sightseeing in New York has not returned to the level until September 11 for five years.

In 2019, the federal government raised nearly $ 16 billion from the item tax on tickets. This income is used for airports, objects, research, and funds for the Federal Civil Aviation Bureau (FAA).

Tobacco

The federal government imposes 7, 5 % of the goods tax on all internal flights. In addition, a section tax of $ 4, 20 per section is charged. Finally, the passenger pays the federal government on September 11, a $ 5, 6 0-way flight tax. [11]

Local airports can collect rates called PFC (PASSIER FACILITY Charge) to cover the maintenance and improvement of airports (almost all airports are collected). The size of PFC does not exceed $ 4, 50.

It is unlikely that air transportatio n-related goods tax and commissions will lead to significant income, and harm may be greater than profits. Aviation transportation can be away from normal work for years, and an increase in tax burden can stop the industry's ability to escape from crisis. There is no doubt that government revenues will decrease due to transportatio n-bearing bases, but how difficult it is to evaluate. AASHTO (American Association of State Officials on Road Transport), a representative of 50 states in the United States, has requested Congress to assign $ 50 billion to make up for the shortage of expected revenue. According to AASHTO's estimates, transportatio n-related income (forecasts for $ 111 billion in 2019), including road training camps, air tickets, automotive fuel taxes, and public vehicles, will decrease by 30 %.

Vapor Taxes

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Although the future of international air transport and domestic air transport is still unclear, it is very likely that this crisis will affect private airlines for a long time. From early April, domestic air transportation decreased by about 40 %, and many airplanes were stuck. As a result, air ticket prices dropped 10 to 6 % yea r-o n-year. In the long run, the worsening travel is not only due to politics, but also because of consumer choices. For example, sightseeing in New York has not returned to the level until September 11 for five years.

In 2019, the federal government raised nearly $ 16 billion from the item tax on tickets. This income is used for airports, objects, research, and funds for the Federal Civil Aviation Bureau (FAA).

Alcohol

The federal government imposes 7, 5 % of the goods tax on all internal flights. In addition, a section tax of $ 4, 20 per section is charged. Finally, the passenger pays the federal government on September 11, a $ 5, 6 0-way flight tax. [11]

Local airports can collect rates called PFC (PASSIER FACILITY Charge) to cover the maintenance and improvement of airports (almost all airports are collected). The size of PFC does not exceed $ 4, 50.

It is unlikely that air transportatio n-related goods tax and commissions will lead to significant income, and harm may be greater than profits. Aviation transportation can be away from normal work for years, and an increase in tax burden can stop the industry's ability to escape from crisis.

Nationwide, in almost all states and settlements, short-term accommodations are subject to an excise tax. The profits from these taxes are often directed towards the formation of a tourist industry or used as additional total funds for local authorities. In fact, considering that going for either meetings, vacations or weekends is not enough, states and municipalities have no choice but to wait for short-term stays until the profit flow is almost gone. The inaccessibility of demand has led to a 6, 8% drop in short-term housing rates compared to a similar period last year.

When the economy booms, some politicians have the ability to tempt visitors to shift their share of the tax burden, which is trying to ignore this in the footfall. However, the export of taxes has the potential to lead to an imbalance of the load on non-residents, these taxes have negative financial consequences for fiscal jurisdictions. In addition to reducing the demand for housing, there is evidence that buyers are moving to neighboring jurisdictions where taxes are cheaper.

New Revenue

According to Inrix, a company that analyzes data on road traffic, the number of private cars traveling across the country fell by 47% in the week from March 30 to April 3, compared to the week from February 22 to 28, just before the pandemic was officially announced. Goods transportation still fell, but not to the same extent, as businesses (especially shops and pharmacies) continued to need daily necessities. The size of long-distance freight transportation fell by 6%, and the size of local paid transportation fell by 26%. This decline leads to a sharp drop in gas taxes.[14]

Recreational Marijuana

In 2018 (the most recent data), state governments raised $48. 2 billion from excise taxes on motor fuels. The profits from these taxes of the host are used to fund infrastructure services and new plans. The decline in revenues is not reflected in all states, as the state and district authorities on roads covered by gasoline, fees, user payments and taxes vary widely: from 6, 9% in Alaska to 71% in Hawaii. In the lower 48 states, North Carolina is more trusted in motivated transportation interests (63, 6%) and North Dakota - the shortest (17, 5%). These states favor low transportation taxes, as well as all taxes on their citizens, because they export taxes at the expense of income taxes, as, for example, Alaska and Northern Dakota. Moreover, these states continue to see a decline in gasoline prices as low oil prices blow holes in their budgets.[16]

The toll will also fall. Eliminating traffic congestion not only reduces the traffic on all roads, including toll roads, but also eliminates the incentives that pay expensive rates to use a ca r-only road. In addition, toll road rates may be affected by traffic density (traffic congestion price). Some states may want to raise gasoline tax rates, but 31 states have already raised gasoline tax over the past decade.

Sin tax is a tax imposed on products that are considered harmful to consumers, and includes taxes imposed on alcohol, tobacco and VAPE. Taxation on sugar beverages is also a sin, but it is relatively unusual and is not included in this category.

Tobacco and alcohol are considered relatively no n-elastic, so it may be attractive for some members of the Diet to increase these taxes. In other words, consumption does not decrease even when the price rises. Furthermore, it may be more politically easier to increase taxes to "sinful" products, rather than increasing the tax to most voters.

The tobacco tax is closely related to the recession. Prior to the Great Depression, there were few tobacco taxes, but by 1939, 21 states imposed goods tax on tobacco. [17] In the 1930s, tobacco consumption per person doubled from 1, 000 to about 2, 000 a year from a year, and tobacco tax increased as a source of government income.

During the great recession, the tobacco revenue was quite stable due to a limited decrease in consumption combined with the tax increase. In 2009, 15 states increased tobacco tax, and the average national average tax tax on tobacco rose from $ 1. 18 in 2008 to $ 1. 34 in 2009. However, the possibility that tobacco tax may be the main financial resources of additional revenue is low. The tobacco tax has been increased in the past 10 years, and by 2020, the average tobacco tax in the state will be $ 81 per box. In addition, about 20 % of the population smoked in 2009, but only 14 % now. < SPAN> The toll will also fall. Eliminating traffic congestion not only reduces the traffic on all roads, including toll roads, but also eliminates the incentives that pay expensive rates to use a ca r-only road. In addition, toll road rates may be affected by traffic density (traffic congestion price). Some states may want to raise gasoline tax rates, but 31 states have already raised gasoline tax over the past decade.

Sin tax is a tax imposed on products that are considered harmful to consumers, and includes taxes imposed on alcohol, tobacco and VAPE. Taxation on sugar beverages is also a sin, but it is relatively unusual and is not included in this category.

Wagering

Tobacco and alcohol are considered relatively no n-elastic, so it may be attractive for some members of the Diet to increase these taxes. In other words, consumption does not decrease even when the price rises. Furthermore, it may be more politically easier to increase taxes to "sinful" products, rather than increasing the tax to most voters.

The tobacco tax is closely related to the recession. Prior to the Great Depression, there were few tobacco taxes, but by 1939, 21 states imposed goods tax on tobacco. [17] In the 1930s, tobacco consumption per person doubled from 1, 000 to about 2, 000 a year from a year, and tobacco tax increased as a source of government income.

During the great recession, the tobacco revenue was quite stable due to a limited decrease in consumption combined with the tax increase. In 2009, 15 states increased tobacco tax, and the average national average tax tax on tobacco rose from $ 1. 18 in 2008 to $ 1. 34 in 2009. However, the possibility that tobacco tax may be the main financial resources of additional revenue is low. The tobacco tax has been increased in the past 10 years, and by 2020, the average tobacco tax in the state will be $ 81 per box. In addition, about 20 % of the population smoked in 2009, but only 14 % now. The toll will also fall. Eliminating traffic congestion not only reduces the traffic on all roads, including toll roads, but also eliminates the incentives that pay expensive rates to use a ca r-only road. In addition, toll road rates may be affected by traffic density (traffic congestion price). Some states may want to raise gasoline tax rates, but 31 states have already raised gasoline tax over the past decade.

Sin tax is a tax imposed on products that are considered harmful to consumers, and includes taxes imposed on alcohol, tobacco and VAPE. Taxation on sugar beverages is also a sin, but it is relatively unusual and is not included in this category.

Concluding Thoughts

Tobacco and alcohol are considered relatively no n-elastic, so it may be attractive for some members of the Diet to increase these taxes. In other words, consumption does not decrease even when the price rises. Furthermore, it may be more politically easier to increase the tax to "sinful" products, rather than increase the tax to most voters.

The tobacco tax is closely related to the recession. Prior to the Great Depression, there were few tobacco taxes, but by 1939, 21 states imposed goods tax on tobacco. [17] In the 1930s, tobacco consumption per person doubled from 1, 000 to about 2, 000 a year from a year, and tobacco tax increased as a source of government income.

During the great recession, the tobacco revenue was quite stable due to a limited decrease in consumption combined with the tax increase. In 2009, 15 states increased tobacco tax, and the average national average tax tax on tobacco rose from $ 1. 18 in 2008 to $ 1. 34 in 2009. However, the possibility that tobacco tax may be the main financial resources of additional revenue is low. The tobacco tax has been increased in the past 10 years, and by 2020, the average tobacco tax in the state will be $ 81 per box. In addition, about 20 % of the population smoked in 2009, but only 14 % now.

However, in some state, the increase in cigarette tax tax can be an option for a shor t-term increase in profit, which is not considered a conclusion of lon g-term economic issues. Reverse tax is a smaller tax burden as the income increases. Most of the lo w-income earners are imbalanced, and the tax burden is relatively small for middle and hig h-income earners. The expansion of the item tax and the principle are that the article tax should only be imposed when it is necessary to destroy any external effect. The external effects from the point of view of economics are the secondary effects or results of the job, and are not reflected in the price of this job, and do not fall down to the people involved in this job. External properties, for example, can be caused by creating and using products and provisions, and may be positive or negative. Or, to make the system a "use r-pay", not as a scale of communal profit. Due to its narrow grounds, it is not considered a source of continuous profit on total cost.

In real time, steam product tax was introduced in 23 states and Colombia environments. In 11 states, personal taxation was introduced in 2019, and bills on vapor products could be observed in more states in 2020.

Stay informed on the tax policies impacting you.

If you talk directly about the state tax revenue, from the first quarter of 2019 to the second quarter, each state is $ 26 billion in gasoline tax, $ 3 or $ 3 or $ 5 billion in formal alcohol tax, and $ 4 billion in installation tax on comfort. , Formally raised $ 9 billion (only $ 420, $ 5 billion) with formal tobacco tax. Depending on the period of freezing, any data on the main category of goods tax can have more or less effects. However, in limited monitoring, their 10 % reductions will lead to not actually receiving approximately $ 4, 25 billion. [5]

The income from the goods tax on nicotine products does not follow the measured footprints. Product tax occasionally occurs, and Bazar is thought to be young and unstable. There is no problem to make a lon g-term economic conclusion on the flow of this profit because there is no reliable data on customers. Apart from this, at the Federal Level, there are all opportunities to take measures related to fragrances and taxes, and all of the interest monitoring may be fundamentally changed.

Liquor taxes are one of the oldest taxes in America. Its roots lie in the whiskey tax introduced in the time of George Washington. The tax was levied periodically to pay off similar battle debts until the Dry Law was enacted. Then, during the Majestic Depression, President Franklin Roosevelt supported the repeal of Prohibition in order to find new keys to profit for the government.[22]

Today, excise taxes on alcohol are levied in all 50 states, bordering Columbia and the federal government. According to some information, the profits from alcohol taxes can be used to buy alcohol, as well as in other categories, for example, to make money. According to consumer sales information, in the week ending March 21, overall alcohol sales were 55% age. Liquor sales were 75%, wine was 66%, and beer was 42%. A significant percentage of sales have shifted online, making online age alcohol sales 243%[23].

However, it is almost impossible to fully offset the costs of closed bars and restaurants (on-premise) with the increase in outside sales (brick and mortar stores). In fact, district consumption accounts for about a quarter of the alcohol market size, and district resale is literally nonexistent in many large cities. Apart from this, if the increase in off-premise sales turns out to be a raw "stock" of customers, the offsetting effect of the excise tax will be the smallest. In fact, some believe that the increase in sales was short-lived, with the increase slowing in the week ending March 28. [25]

Cities and towns levy alcohol taxes according to size, and thus are not affected by the liquor tax, but the margins of restaurants and bars are significantly higher, regardless of whether they sell alcohol in stores or bars. In effect, they pay no attention to the fact that only a quarter of the size falls in the middle of the retail, price bill.

It is not yet clear how the alcohol bazaar will fare in the worst months, but the increase in the alcohol excise tax has the potential to hurt some current businesses, for example, under risk of failure. Apart from this, when restaurants and bars can reopen to find, the suppression of the subsidy has the potential to limit their legal ability to recover. A liquor tax increase, like a tobacco tax increase, would be highly regressive and disproportionate to low-income Yankees.[26]

New trends in state taxes include marijuana and sports fees. These could be considered taxes on crime, but are included here because of their modernity. While both allow for new revenues, they are complex long-term projects that cannot be easily reversed or stopped.

Dwindling revenues from traditional sources, combined with talk of expanding marijuana sales, may force some states to consider the possibility of legalizing marijuana and introducing an excise tax. While legalization is unlikely to lead to short-term revenues, it may become part of the revenue correction picture in a few years. However, given the innovative nature of the market, states should expect revenues to be volatile and should not allocate them along arbitrary cost priorities.

In states where legalization has already occurred, it generally takes time for the market to achieve significant profits. Building the systems necessary for a recreational cannabis industry to function is costly.[28]

These lessons encourage states to be cautious in their revenue and allocation projections and not present legalization as a long-term budget decision. For example, New York Governor Andrew Cuomo (Democrat) has tried and failed to legalize marijuana for the past two years,[29] and presented a budget that projected revenues of just $20 million in the first year of legalization. In Maryland, a committee that had been working on possible legalization postponed further action, citing regulatory complexity. 30) There is an added complexity that all federal actions on cannabis forecasts can change in any direction.

It is important to get the legal and tax structure right, since regular dispensaries will compete with the black and gray markets, and too high a tax rate could keep consumers in the untaxed market.

(A) Maine legalized recreational marijuana on the ballot in November 2016. It is expected to be legalized in 2020.

Note: The Columbia District voted to legalize and purchase marijuana in 2014, but federal law prohibits any consequences of doing so. In 2018, the New Hampshire Legislature voted to legalize marijuana possession and distribution, but not resale. Alabama, Georgia, Idaho, Indiana, Iowa, Kansas, Kentocky, Louisiana, Minnesota, Nebraska, Oklahoma, Pennsylvania, Tennessee, and Wisconsin impose drug control taxes on unprofitable purchases. Some states impose district and community sales taxes on marijuana products. These taxes are not listed here.

Source: State Legislation, Bloomberg Tax.

In 2019, eight states approved sports and tax rate regulations, and 12 states and the District of Columbia already have functional sports betting markets. In real time, out of 21 jurisdictions, 14 have functional markets. Ten of these markets allow mobile betting, and four only have physical sportsbooks.[31].

As with cannabis, new profits are unlikely to be noticed in the short term. States where betting is not yet permitted will need to create new regulatory frameworks to organize sports betting operations. Apart from this, most sporting competitions and events have been canceled to slow the spread of the coronavirus. On these grounds, it is unlikely that adjusting tax rates will result in significant profits in short-term odds.

When sports return - which is likely without a mass of visitors - there is a real chance of such a thing, in fact, tax rates on sports on the online side will recover quickly. If small public distances are introduced towards the long-term period, brick-and-mortar casinos and physical sportsbooks will not be able to compete with online sports engines.[32].

The long-term potential of sportsbooks suggests real opportunities for states to make new profits.

As politicians, they must make difficult decisions because they will be the ones to recognize the dimensions of the economic problem. Given the severity of today's economic downturn and its expected duration, states must examine their current costs.

States that accept budgets will want to prioritize expenses by giving governors the power to cut some expenses during the fiscal year in order to deal with uncertain revenues. Given the higher revenue levy caps when preparing budgets, governors want to accept budgets that leave them with cash on hand. This is because if revenues recover or additional federal aid is received, it is easier to move expenses back in the direction of revenue growth than to make cuts at the end of the fiscal year.

This paper examines whether excise taxes solve the budget deficit problem, and there is no short answer to this question, although there are of course nuances. Even if politicians understand that excise taxes are not an effective means of financing overall priority expenditures in the long term, excise taxes can play a role in national revenues.

Depending on consumer response to the pandemic, excise taxes from the tourism industry may suffer for a long time, making it unlikely that an increase in excise taxes on air tickets and hotels will have a positive effect. A significant increase in revenues from tobacco and alcohol due to increased consumption is unlikely and undesirable. Revenues from marijuana and sports betting are long-term projects that states should not pursue for the sake of short-term revenue growth. Federal uncertainty regarding vaping and marijuana complicates it for states to forecast revenues from these sources in the long term.

For these reasons, revenues from excise taxes should be used to cover costs associated with taxable activities and goods, whenever possible. Relying on excise taxes to set long-term budget priorities is too volatile and unreliable.

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