Mutual Benefit Between Casinos and Economic Development

Casinos have become increasingly popular among the general public around the world. The casino sector has grown substantially over the past two decades. In surveys conducted by the American Gambling Association, US voters often say they believe gambling improves the local economy and strengthens communities.

Elisa Mueller

Finance

Jan 24, 2022

Casinos have become increasingly popular among the general public around the world. The casino sector has grown substantially over the past two decades. In surveys conducted by the American Gambling Association, US voters often say they believe gambling improves the local economy and strengthens communities.

Is there a direct relationship between casino development and economic growth? Several studies on this subject have produced mixed results over the last three decades. While such venues may contribute to the economy in some ways, they are not immune to external macroeconomic conditions.

Starting Point

There are a large number of states that have legalized commercial casino gaming because they regard it as a source of economic growth. State and local governments can expect increased tax revenue as well as higher retail sales, increased employment, and an increase in tax revenue. According to different studies, the state budgets of several states have been under increasing fiscal pressure, and the states fear that they will lose revenue to neighboring states' casinos.

Additionally, public opinion has become more favorable towards gambling. Indian tribes have also been allowed to operate gambling venues on their reservations since 1988 following the passage of the Indian Gaming Regulatory Act.

Casinos Create Jobs

Many casino supporters argue that the industry expansion increases local employment by lowering local unemployment rates. After the resort/hotel is introduced, the local unemployment rate goes down, so it must be that there are some additional economic benefits. There may be arguments to support the hypothesis that this has indeed reduced local unemployment if the drop in unemployment is greater in the local area than statewide.

In order to increase employment, a casino with a no wagering casino bonus must employ labor from the local area in order to operate. By doing so, unemployment will be reduced locally. It is important to consider not only if it increases unemployment, but for whom they do so as well. Many gambling-related jobs require some skill, whether it's accounting, dealing cards, security, or another specialty.

Casinos Help Retailers Promote Sales

Researchers have focused the most attention on the effect of casinos on local retail sales, and therefore local sales tax collections. Local retail sales are impacted by the number of visitors from outside the local region that the venue attracts. A site with a majority of local clients is likely to have reduced retail sales and, therefore, reduced retail sales tax revenues in the local area.

Local retail sales would likely increase, however, if casinos are part of a tourist vacation, where non-local visitors spend several days gambling, touring museums, and eating out. Many brands offer their customers restaurants, shops, and hotel rooms in addition to gambling services. Purchases made at these outlets are subject to state and local sales taxes.

Gaming Tax Revenue Boosts Economy

Public education seems to be the most popular use for tax revenue in many states, but other government programs also benefit from the revenues. State governments often emphasize how much money the casino industry contributes to public education. Since the tax on casino revenue began, the public has seen an increase in education spending.

Tax adjusted revenue is generally taxed and used to fund local programs. For example, tax rates in Missouri are 18 percent, plus a 2 percent tax to support city governments. While in Indiana tax rates are 20 percent. In Illinois and Mississippi, taxes increase progressively. Revenue from taxed operators is a benefit to the recipients of the revenue - in this case, the government.

Conclusion

There is no doubt that casino entertainment is here to stay. All that remains is to determine to what extent will it gain popularity in the future. When discussing the issues of economic development and casinos, both citizens and government officials should understand the potential benefits of the industry.