Casino Gambling and Economic Development

Casino Gambling and Economic Development

July 26, 2023
Casino Gambling and Economic Development
In recent decades, some officials and policymakers at the
gambling revenue, with gross gaming revenue (the
federal, state, and local levels have argued that gambling—
difference between the amount of money players wager and
in particular, casino gambling, but also online and sports
the amount that they win) totaling $60.4 billion, eclipsing
betting—can help facilitate economic development. Starting
the 2021 revenue record of $53.0 billion.
in the 1990s and continuing through the 2010s, a number of
states legalized and expanded commercial (non-tribal)
Potential Economic Development and
casino gambling, sometimes claiming that new venues
Fiscal Benefits
would increase jobs and tax revenue.
Federal and state elected officials occasionally link
gambling and economic development. For example, after
Compared to state and local governments, Congress and the
New Jersey approved sports betting in casinos and at
federal government have been relatively less involved in
racetracks in 2018, Governor Phil Murphy said, “Our
legislating on and regulating gambling. Even so, in recent
casinos in Atlantic City and our racetracks throughout our
years Congress has discussed certain issues related to
state can attract new businesses and new fans, boosting
gambling, including whether to take a more active role in
their own long-term financial prospects.” A February 2023
regulating the activity and how to tax it.
press release from the co-chairs of the Congressional
Gaming Caucus noted that one of the group’s goals was to
This In Focus deals primarily with commercial, non-tribal
“help well-regulated gaming markets flourish and
casinos. It summarizes the recent history of gambling
incentivize economic development.”
legalization and expansion, the debates over gambling’s
potential as an economic development strategy, and
Some policymakers have also argued that gambling can
considerations for Congress.
have fiscal benefits for state and local governments. A 2022
report by the Federal Reserve Bank of Richmond
State Legalization and Expansion
(Richmond Fed) described the three major drivers of
Up through the 1980s, no commercial casinos existed in the
commercial casino legalization and expansion between
United States outside of Nevada and New Jersey. That
1985 and 2000 as attempts to:
began to change in the late 1980s and 1990s, when at least
nine states (Colorado, Illinois, Indiana, Iowa, Louisiana,
• address fiscal stress;
Michigan, Mississippi, Missouri, and South Dakota)
legalized commercial casinos. This trend continued in the
• keep gambling revenues within a given state; and
2000s and 2010s, with at least more eight states (Florida,
Kansas, Maine, Maryland, Massachusetts, New York, Ohio,
• attract spending from tourists from states without legal
and Pennsylvania) legalizing commercial casinos in those
casino gambling.
years.
Empirical evidence on these strategies’ effectiveness is
Another notable change in the gambling environment
mixed. The Richmond Fed found that job gains from new
occurred in 2018, when the U.S. Supreme Court, in Murphy
casinos were mostly limited to low-density regions without
vs. National Collegiate Athletic Association, ruled that a
nearby casinos. A 2008 paper from researchers at the
federal law that prohibited states from authorizing sports
University of Wisconsin-Oshkosh did find that casino
gambling was unconstitutional. This allowed states to
openings increased employment and earnings for
legalize sports betting, which had previously been allowed
surrounding communities, but noted that the gains were
only in Nevada. Following the ruling, a number of states
most pronounced in smaller counties. According to the
legalized sports betting, and allowed it to take place in
Richmond Fed, evidence suggests that as more states
commercial casinos and, in some cases, through online
legalize casino gambling and as more casinos open (and as
gambling platforms. According to the American Gaming
other gambling options, such as online betting, have
Association (AGA), at the end of 2022, legal sports betting
developed), gambling’s ability to generate economic
was available in 32 states and Washington, DC.
development has decreased.
This trend of legalization has led to a surge in gambling
Some labor economists anticipate strong growth in the
venues and revenue. According to the AGA, 27 states had
number of gambling jobs in coming years. The U.S. Bureau
land-based commercial casinos at the end of 2022, and six
of Labor Statistics (BLS) forecasted 17% growth in
states (Connecticut, Delaware, Michigan, New Jersey,
gambling services workers from 2021 to 2031. Although
Pennsylvania, and West Virginia) had online casinos. In
the BLS noted that some of this projected growth may be
total, the AGA counted 466 domestic commercial casinos.
due to the recovery from the COVID-19 pandemic, its
The AGA reported that 2022 was a record-breaking year for
forecast for employment growth in all occupations over the
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Casino Gambling and Economic Development
same period is 5%. The BLS further forecast that online
Policy Considerations
gambling may limit overall gambling employment, as
While gambling is regulated primarily at the nonfederal
online gambling does not require the same employment
level, Congress may consider the federal role in regulating
levels or job types as in-person casino gambling. Figure 1
gambling. To date, Congress has not authorized a federal
presents data on jobs in casinos and casino hotels.
gambling regulatory entity.
Figure 1. Jobs in Casinos and Casino Hotels,
Congress could analyze the costs and benefits of expanding
2005-2022
federal licensing and regulation of gambling and any
potential effects on state and local economic development
outcomes. Congress has previously considered aspects of
this issue. In the 111th Congress, the Internet Gambling
Regulation, Consumer Protection, and Enforcement Act
(H.R. 2267) would have authorized the Department of the
Treasury to license and regulate internet gambling.
According to a Congressional Budget Office and Joint
Committee on Taxation (JCT) cost estimate, licensing fees
from H.R. 2267 would have resulted in a net federal
revenue increase of $283 million over 10 years. During the
112th Congress, the JCT forecasted an additional $42 billion
in federal revenue over 10 years under H.R. 2230, the
Internet Gambling Regulation and Tax Enforcement Act of
2011, which would have imposed a license fee equal to 2%
Source: U.S. Bureau of Labor Statistics, Quarterly Census of
of all funds deposited by customers into special accounts
Employment and Wages.
that could be used for online wagering.
Notes: Casino hotels are not included in the data for casinos.
Even if greater federal regulation of gambling leads to
Studies on the effect of casino gambling on state tax
increased revenue at the federal level, new gambling
revenue are also inconclusive. Figure 2 shows total
policies may have the potential to cause tax revenue and
business (not tax) revenue for casinos and casino hotels
employment declines in certain locations, for example by
between 2010 and 2021. Prior to the COVID-19 pandemic,
affecting business decisions. These impacts may depend
revenue for casino hotels grew steadily (casino revenues
upon the details of specific legislation and the specific
were more stable). After a steep drop in 2020, revenue
actions taken by individual states in response. Congress
recovered strongly for both casinos and casinos hotels in
may seek to further study any potential such repercussions.
2021. However, gambling tax revenue among individual
states did not necessarily increase, or did not increase at the
In considering potential gambling policies, Congress may
same rates. In 2019, the Pew Charitable Trusts found that,
distinguish between online and in-person casino gambling.
as more casinos opened throughout the country in the 2000s
Online gambling may involve cybersecurity considerations
and 2010s, state casino tax revenue growth tended to slow.
that are not relevant to in-person gambling, which may
Pew attributed this trend partly to its analysis that, as new
affect how Congress might choose to implement any
casinos opened, they poached gambling activity from
potential oversight and regulation. From an economic
existing casinos, both within a state and from nearby states.
development perspective, while the BLS forecasts strong
growth in gambling employment overall over the next
Figure 2. Total Revenue for Casinos and Casino
decade, it cautions that online gambling does not require the
Hotels, 2010-2021
same types of jobs as in-person casino gambling. Online
Dol ars in bil ions
gambling may require more relatively higher-paying jobs in
information technology, while casino gambling may require
more relatively lower-paying jobs like cashiers and card
dealers.
Congress could assess if it wants to alter the federal excise
tax on gambling. Currently, any wager authorized under
state law is subject to a federal tax equal to 0.25% of the
amount wagered; unauthorized wagers are subject to a 2%
tax (26 U.S.C. §4401). Additionally, any individual
receiving wagers is subject to an annual occupational tax of
either $50 or $500, depending on whether the wager
accepted was state-authorized or not (26 U.S.C. §4411). In
the 118th Congress, the Discriminatory Gaming Tax Repeal
Act of 2023 (H.R. 1661) would repeal the taxes. To date,
Source: U.S. Census Bureau, Service Annual Survey.
the bill has not advanced out of committee.
Notes: Casino hotels are not included in the data for casinos. Data
for casino hotels available only for 2013-2021. Data for casino hotels
Adam G. Levin, Analyst in Economic Development Policy
includes revenue from non-casino activity.
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Casino Gambling and Economic Development

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