Casinos Are a Gamble
PLUS: Why your local sales tax holiday isn't actually festive.
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The Omaha, Nebraska, city council recently okayed $17.5 million in tax incentives for a new casino, part of a gambling expansion that voters approved via ballot referendum in 2020. As occurs so often with the current American boom in gambling legalization, the idea behind opening new casinos is ostensibly to provide an economic jolt.
“These are good paying jobs in the casinos and careers in the casinos from marketing to accounting to dealers to janitors,” said one supporter (who very much stands to benefit from legalization). “This is going to equate to $145,000,000 in new payroll for the state of Nebraska and Nebraska residents.”
There’s a problem though: The U.S. is awash in gambling options. Adding new ones isn’t going to do anything appreciable for a local economy.
Nearly every state in the U.S. allows gambling of some sort, and most of them allow casinos, whether owned by Native American tribes or other commercial owners. Where once there was scarcity — with Atlantic City and Las Vegas tourist destinations because they offered something nowhere else had — there is now overabundance. People don’t need to travel to gamble because, for nearly everyone, there is gambling available close to home.
Just look around the country: Late last year, Biloxi, Mississippi, approved tax incentives for a new casino. Kentucky is subsidizing new racetracks with gaming. And states across the country are legalizing sports gambling. In addition to Nebraska, Virginia and Colorado expanded casino gambling via ballot initiative in 2020.
There’s no shortage of opportunities, if wagering is your thing. But that constant growth means that any one new facility is less likely to be impactful on the local economy, because there’s probably another option not that far away.
In fact, as I wrote in my book, new gambling facilities are increasingly being opened not with the previous goal of attracting anyone new to the area to spend their dollars, but simply to prevent local dollars from crossing over state lines, spent by people willing to drive an hour or two to play a few hands of cards or, more likely, to sit at a slot machine, and then drive home.
Therefore new casinos aren’t competing with other casinos, really. They’re competing with other local entertainment options — and therefore not creating anything new for the economy, just shuffling already existing dollars around, and maybe protecting a place from economic poaching from another jurisdiction down the road.
Meanwhile, Vegas and Atlantic City are trying to find non-casino things to get people to come visit, realizing that their once precious commodity can now be found everywhere.
Studies have shown that casinos have a very modest impact on employment, sometimes increasing it, sometimes not, with success very dependent on the particular circumstances in that location. Meanwhile, they tend to decrease state revenue, even though gambling tends to be taxed at a higher rate than other things. There are also harms from bringing an addictive form of entertainment into the community, which wind up costing money to ameliorate too.
And those studies I’m citing are not very new, so I imagine some of the effects have changed as more and more states and cities embraced gambling, with the revenue effects likely plunging even more. Taxpayers are paying to subsidize a form of entertainment that winds up lowering what their state has available to spend on services and other priorities, in exchange for the possibility, but not the guarantee, of a few new jobs.
Still, nothing can seem to shake the hold that gambling as an bottomless pot of gold has on lawmakers and candidates. Not an election cycle goes by, I feel like, when someone isn’t putting new casinos out there as an economic fix: This last time around, it was New York City mayoral candidate Andrew Yang that I noticed the most, but I’m sure there were others. Next time it will be someone else, or a new round of ballot initiatives.
But the fact remains that casinos are a bad bet for local economic development. Gambling may be fun, but it usually doesn’t make you rich. That goes for your community too.
UPDATE: Readers here hopefully remember the incident a few months ago when Fort Wayne, Indiana, granted an Amazon warehouse $16 million in tax breaks, even though several members of the council literally did not know the beneficiary of the public largesse they were doling out, due to non-disclosure agreements Amazon insisted upon.
Well, Amazon had the chutzpah to come back with a second request for an additional $7 million in property tax breaks for machinery that will be used in the warehouse. This time, the council said no. Better late than never, I suppose.
ONE MORE THING: ‘Tis the season for sales tax holidays, those periods of time in which lawmakers decide to waive sales taxes in an attempt to boost consumer spending, usually around back-to-school season. 17 states this year have a sales tax holiday on the books.
So it feels like a good time to share this article I wrote a couple of years ago about why sales tax holidays are a massive scam that don’t help the people at whom they’re ostensibly aimed. They just give politicians the ability to claim they’re doing something for the working class when they’re really doing nothing at all.
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Thanks again!
— Pat Garofalo