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Abstract
This research examines whether states with legalized casino gambling have improved the quality of their fiscal systems by taxing corporate casinos. From the late 1980s until the early 2000s, state governments experienced stagnant tax and revenue income from key sources of funds. States also encountered public resistance to increases in state income and other taxes to resolve the problems. As a result, a number of states legalized corporate casino gambling as a means of raising additional revenue. These states are Colorado, Illinois, Indiana, Iowa, Louisiana, Michigan, Mississippi, Missouri, and South Dakota. Currently, many states rely on tax revenue from corporate casino gambling as a means of increasing revenue without increasing general, broad-based taxes.
This study's significance lies in the recognition that casino gambling has become a major industry in the United States over the past two decades (Garrett 2003). Growth as a source of additional state tax revenue has not been matched by a corresponding increase of academic research on casino gambling. The majority of studies on corporate casinos focus on the social vices associated with gambling, such as increases in violence and pathological gambling. Some studies on the economic impact of casino gambling are commissioned by corporate casinos to tout their economic benefits to states and localities. Only a few rigorous academic studies on the fiscal impact of casino gambling exist.
Most citizens and policymakers lack sufficient information about the fiscal impact of gambling taxes on state budgets. To shed more light on this issue, the research addresses four questions: (Question 1) Are states maximizing collected corporate casino tax revenues? (Question 2) Does corporate casino tax revenue displace other tax revenues in state budgets? (Question 3) Does earmarked gambling revenue displace money spent previously on specified programs? (Question 4) Does gambling revenue reduce state government revenue portfolio stability?
The answers to these questions are probative as to casino tax structures' contributions to existing tax systems. The research finds: (1) most states are maximizing the revenue collected from corporate gambling taxes; (2) casino gambling taxes displace other sources of state income, but result in overall increases in state revenue; (3) casino gambling taxes displace earmarked spending, but contribute to greater spending on specified programs; and (4) the introduction of casino gambling taxes result in greater state revenue portfolio stability.
The focal points of this research provide a valuable first step in establishing a greater understanding of the fiscal issues confronting governments when developing gambling tax systems for corporate casinos.
