Gambling has exploded in America thanks to the Supreme Court’s 2018 decision to allow legalized sports betting throughout the country. Americans have bet over $220 billion on sports since that time. It’s become big business and state lawmakers now want to expand the industry even more.
Lawmakers believe gambling can solve their revenue problems. Expanding it and legalizing it means more tax dollars going into state coffers–or so advocates imagine it. But this idea isn’t always all that it’s cracked up to be. When done incorrectly, expanded commercial gambling doesn’t solve the problem. It can even mean more budgetary woes for states.
Commercial gambling is growing alongside online sports betting. At least twenty-seven states offer land-based casinos. Another six states offer online casinos. Several states legalized and expanded opportunities in this area with dollar signs in their eyes. But the results they expected don’t exactly materialize.
A 2016 study found that states see some short-term gains in tax revenue, but they don’t always yield significant long-term benefits. In fact, the research shows that expanded gambling opportunities can even reverse gains and result in net revenue losses. It’s believed that this decline may be due to competition with other states that expand gambling opportunities and the abundance of gambling options diluting the revenue stream.
A 2013 study found that some forms of gambling can temporarily increase state revenue, but casinos aren’t always among them. That study revealed that, in some cases, for every additional dollar generated from casino tax revenue, net state revenue decreases by over four dollars. The study also found that the existence of casinos in some states has coincided with a $85 million decrease in net state revenue. This is believed to be caused by the more time people spend in casinos, the less money they spend outside of them.
There are ways gambling expansion can increase state revenue. Both of the studies do cite some of the gains in tax dollars in certain situations. But it’s not the guaranteed solution to state budget woes.
That’s why states should think twice on trying to sell tax cuts with expanded commercial gambling. Republican lawmakers believe it’s a great pitch and deflates criticisms that tax cuts will hurt the state budget. In fact, the GOP is pursuing this strategy right now in North Carolina. Legislators there believe they can get tax cuts passed if they authorize more casinos in the state to make up for alleged shortfalls in the budget. But this is a bad bet.
Furthermore, it undermines conservative principles. For years, Republicans and conservatives have pushed for tax cuts to generate more economic prosperity and, in turn, more tax revenue. Republicans should confidently assert the benefits of tax cuts without resorting to dubious measures to sell it.
Lawmakers may not be just motivated by political calculation here. Lobbyists for the gambling industry have donated generously to several North Carolina legislators. Legislators may just be trying to pay back what’s been given by pushing for the casino authorizations. The Conservative Political Action Coalition recently denounced the North Carolina plan for its tawdry optics, saying it amounts to “lobbyists holding tax cuts hostage to gambling expansion.”
For better or for worse, America is choosing to embrace gambling. State lawmakers may see this as a money tree, but it’s not the godsend they imagine for their budgets.
If Republicans want to pass tax cuts, it’s better to push them on their own. It’s a high-risk gamble to pair the cuts with something completely different.