Does Legalized USA Gaming Mean Fiscal Benefits?

One of the primary reasons for governments introducing USA casino gambling is the purported economic growth from gaming development. Among these benefits is economic growth. Over the last half-century, policies that promote economic growth have become an integral part of public sector economic activity.

In the U.S., state government attempts to attract industry via tax breaks and financial incentives have been the object of considerable research attention. But the apparent inability of either of these sets of policies to sustain successful outcomes over time has led state policy makers to explore alternative avenues.

Writing in the 1930s Joseph Schumpeter noted that one method of spurring economic growth is to provide a new good to the consuming public. Since legalization of previously illegal activity is tantamount to introducing a “new good” to the public menu of consumption possibilities, there should be no surprise that a growth policy that has seen increasing popularity is legalized gambling.

The past two decades have witnessed an explosion of U.S. state legalization of betting on horse racing, dog racing, lotteries, casino games, and so on. Even now, states consider legalizing additional types of gambling. Since the electoral majority sometimes considers gambling a “bad”, some offsetting benefit to its provision must be offered to justify legalization. That benefit, politicians argue, is economic growth resulting from increased spending, tax revenues, and employment.

Because the availability of casino gambling, in particular, has been strictly limited, regions that were early to legalize casinos could expect highly profitable industries and increased tax earnings and employment. Most of the literature deals with the U.S. experience, and that is the focus here.

There are numerous success stories of legalized casino gambling in the U.S. Las Vegas is certainly the most famous. Tunica County, Mississippi provides another interesting example. It had been known as the “poorest county in the nation” and the focus of many poverty studies. Webster Franklin, director of the Chamber of Commerce of Tunica, testified to the effects of the casinos at a 1994 congressional hearing. He explained how most of the studies on his county suggested government aid did not help lower the 26% unemployment rate.

There are also states and cities that have had less successful experiences with casino. Many researchers believe the casinos in Atlantic City, for example, have largely failed to revitalize that economy. In some countries, the casinos are also so small and few that they could hardly have an effect on local economies.

An example of this would be casino gambling in Belgium. While casino gambling has just recently been legalized in some countries, in the U.S. the expansion seems to have slowed, with 11 states currently hosting legal non-Indian casino industries and 28 states with Indian casinos. Perhaps this slow-down is because of uncertainty of the real economic effects of legalization.

References:

Councils, L., & Anderson, G. (2014). London borough leaders back Newham’s call to curb casino-style gambling in high streets.

Lalive, R., Manai, M., & Stutzer, A. (2014). Gender Differences in Well-Being and Equal Rights. Encyclopedia of Quality of Life and Well-Being Research, 2420-2424.