Do Casinos Reduce Taxpayer Burdens? No! Casino Gambling States Spent More, Taxed More, with Slower Growth

Located in 24 states, 515 commercial casinos in 2016 collected $8.9 billion in taxes on $40.0 billion in gambler losses for an average tax rate of approximately 23%, or roughly triple the average sales tax rate.

Eleven of the 24 casino states devoted casino tax collections to education spending, while the remaining 13 states dedicated the taxes to a wide array of state and local spending projects. Table 1 shows how casino states differed from non-casino states in terms of spending, taxes, and economic performance.

Did these tax collections result in any meaningful tax relief, or instead fuel an increase in state and local government spending?

• Per $10,000 in gross domestic product (GDP), state and local government agencies in casino states spent and taxed more heavily than non-casino states.
• Moreover, casino states expended more on education as a share of GDP than non-casino states. However, states that dedicated casino tax collections to education spent less as a share of GDP than casino states that did not target education for casino tax collections.
• Additionally, data show that casino states expended more heavily on police operations than non-casino states in 2016.
• In terms of economic performance, as measured by GDP growth, non-casino states expanded more briskly in periods 2014-16, 2016-18 and 2014-18.

In summary, data indicate that, for the period analyzed, casino states spent more on state and local government activities, taxed their citizens more heavily, and experienced slower GDP growth.