The rapid expansion of legal gambling across the United States in recent decades has significantly affected state and local economies. Once prohibited in most states, commercial casinos, sports wagering, lotteries, and other forms of betting are now legally permitted in some manner in 48 states.
This surge in sanctioned gambling activities has produced fiscal tradeoffs and a mix of benefits and costs for states and municipalities embracing the industry.
Tax Revenue
The most direct economic benefit stems from the taxes levied on gambling operations. States tax gross gaming revenues at varying rates, ranging from 6.75% in Nevada to over 50% in Rhode Island. These taxes generated a staggering $27 billion in state revenue in 2019, providing crucial funds for government services.
The biggest beneficiaries are Nevada ($893 million in 2019 gaming taxes), Pennsylvania ($1.5 billion), and New Jersey ($425 million). At the local level, host cities for casinos also impose additional municipal taxes that pay for infrastructure, schools, public safety, tourism promotion, and other municipal needs.
Job Creation
Constructing a new casino complex carries a price tag averaging over $500 million, creating thousands of temporary construction jobs in the process. Once operational, casinos require thousands of employees to handle gaming, hospitality, food service, hotel operations, entertainment, security, marketing, maintenance, and administrative roles.
The American Gaming Association estimates that the U.S. casino industry directly employs over 760,000 workers nationwide. These are well-paying jobs, with gaming supervisors earning a median annual wage of $54,000 according to the Bureau of Labor Statistics.
Increased Tourism and Economic Activity
Casinos often boost tourism to the locales hosting them, spurring broader economic growth. Gambling destinations attract visitors who then spend money at local shops, restaurants, hotels, entertainment venues, and other tourism-related businesses near the casinos.
Studies show that for every $1 spent in the fastest withdrawal online casino, another $3 in economic activity is generated locally. Since legalizing gambling in 2017, Pennsylvania has seen $5.5 billion in new consumer spending, prompting the opening of multiple new hotels, restaurants, and stores near gambling sites.
Downsides and Social Costs
While gambling clearly produces economic benefits, the activity also carries high social costs and downsides that impact state and local budgets. Problem gambling generates huge expenses for addiction treatment, mental healthcare, homelessness services, criminal justice costs, and more.
Researchers conservatively estimate that for every $1 gained in combined state and local gambling tax revenue, $0.90 is spent handling these issues. There are also considerable regulatory costs for proper oversight of the industry.
Cannibalization of Local Business
Another concern is the substitution effect – money spent in casinos reduces consumer spending at existing merchants such as restaurants, movie theaters, and retail stores. Academic studies offer conflicting findings on this displacement, with estimated declines ranging from 8-30% of casino revenues.
However, other researchers argue no statistically significant business displacement occurs. More research is warranted.
Overall Impact
On balance, evidence indicates properly regulated gambling provides net economic gains for most regions, but prudent cost-benefit analysis is vital. To maximize the benefits while mitigating risks, lawmakers must enact strong oversight, set gaming tax rates at reasonable levels, and fund problem gambling programs.
With the right policies, local communities can successfully leverage gambling as a revenue generator and tourism catalyst that spurs broader economic growth and development. The promise of added jobs and tax dollars will likely induce more states to legalize gambling in the coming years.