Whether an economic growth impact exists may be of less concern to politicians than the amount of tax revenues that casino or other gambling activities create for the government. Of course the various gambling industries often point to the taxes they pay as a measure of the tax relief provided by the industry to the state’s (or local) citizens. For example, Missouri taxpayers and politicians may assume that the $742 million in lottery sales or the $403 million in taxes paid by the casino industry represent net increases in tax revenues (or reductions to the citizens’ tax burdens).
This may be the case, but it is more likely that government spending has increased or that the taxes raised by gambling are offset by tax losses from other types of consumer expenditures. The tax revenue effect is not as simple as it might at first seem. A number of studies have examined the impact of one gambling industry on other gambling or non-gambling industries.
Other papers have examined the impact of gambling on state tax revenues.1 Overall, these studies find that one industry either harms another industry or does not affect it. No study has found that different gambling industries help each other. In addition, the effect of gambling on state tax revenues is mixed. Some of the published findings are summarized in table 6.1.
These studies have several limitations in terms of understanding general relationships among U.S. gambling industries and their overall impact on state government revenues. First, for the most part these studies examine a single industry’s effect on another industry but not vice versa. Second, most of the studies examine a single state or county.
Third, there are some limitations to the types of models used. For example, many of the studies account for the gambling industry only through a dummy variable. Accounting for the mere existence of a casino, for example, is much less enlightening than accounting for the size of the industry. Jackson and I have provided a general analysis of the relationships among the different gambling industries within the United States (Walker and Jackson 2008b). We also have examined the overall impact of legalized gambling on state government revenues (Walker and Jackson 2011).