Casinos and Economic Development
Casinos increase employment.
Supporters of casinos often highlight a decrease in the community’s unemployment rate. It follows the introduction of a casino as a sign that casinos have a positive impact on local employment. The casino reduced the regional unemployment rate since it decreased after the casino was established. Perhaps. The local area’s unemployment rate change should be evaluated against the statewide unemployment rate change for the same period. If the changes are similar, the casino area’s employment growth may be due to the business cycle rather than the casino’s establishment. One could make the case that the casino has effectively decreased local unemployment.
The main idea is to contrast local unemployment fluctuations with statewide unemployment fluctuations. Additional aspects, like shifts in population and the economic climate for local businesses, must also be considered when evaluating changes in local unemployment rates following the introduction of a casino. Just look at differences in local unemployment rates over time. without an understanding of population dynamics and the statewide business cycle can paint a false picture of the employment benefits of casinos.
Casino tax revenue is a benefit.
Issue 1: Most states tax-adjusted casino revenue and use the taxes to fund state and local programs. In Missouri, the tax rate is 18 percent, and there is an additional 2 percent tax to aid local city governments. Indiana has a 20 percent tax rate. Illinois and Mississippi have a graduated tax schedule.
Casino proponents and state and local governments promote casino tax revenue as a benefit. This revenue is a benefit for the recipients of taxed casino revenue. However, it is important to realize that this revenue is not “new money” to society. Taxes result in a transfer of income from one group to another group—in this case, casino owners to state and local governments (and eventually to program recipients). So, for example, while the state of Missouri collected nearly $190 million in casino taxes during 2001, this $190 million is a cost to casino operators. Zero new money was created as a result of the casino tax.
Issue 2: State governments use casino tax revenue for various programs, but public education seems to be the favored destination for casino tax revenue in many states. States often promote how much money from casino revenue is earmarked for public education. This suggests to the public that spending on education has increased since the taxing of casino revenue began. Not necessarily.
The problem is that all earmarked revenue is interchangeable. Consider the following example: Your son is in college and spends $40 a week on pizza. You send him a check for $20 and insist that he spends the money on pizza. This suggests that his total spending on pizza will now be $60 a week. But nothing is preventing your son from taking $20 out of his original $40 and using it for something else, and then simply adding your $20 back to get the final $40.