Social and Economic Impacts to Consider Public Hearing Comments Atlanta GA 10 December 2015 Douglas M Walker PhD Professor of Economics College of Charleston Charleston SC USA About me ID: 449269
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Expanded Gambling in Georgia: Social and Economic Impacts to ConsiderPublic Hearing CommentsAtlanta, GA10 December 2015
Douglas M. Walker, Ph.D.
Professor of Economics
College of Charleston
Charleston, SC, USASlide2
About meProfessional BackgroundCollege of Charleston (2007-present)Georgia College (1998-2007)Research on socio-economic impacts of gambling2 booksMore than 50 journal articles and book chapters
Consultant for state government agencies, including
Florida Legislature
Maryland State Lottery and Gaming Control AgencyMassachusetts Gaming CommissionMissouri Office of the Attorney General…and various research agencies and industry groups
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Interest in GeorgiaGeorgia resident for 9 yearsGA casino expansion would represent large expansion in SE, and could affect politics in South CarolinaInteresting perspectives, outdated research cited during Savannah meeting in Nov.
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1 Economic perspective on gamblingEveryone has a perspective, or bias… Economics focuses on voluntary, mutually beneficial transactionsConsumers are sovereign and rational‘Gambling’ is putting something of value at risk on the outcome of an uncertain event
Enjoyable and entertaining to some people, not to others
Since the expected value of all casino bets, lotteries, etc., is negative, gambling must provide entertainment value
Psychologists generally view the issues from the perspective of minimizing potential harms from expanded gambling…
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Disordered gamblingResearch suggests that 0.4 – 2.0% of the adult population has a gambling disorderNot ‘rational’ – inability to control behaviorSuffer financial stress, problems with family, friends, career‘Social costs’ are attributed to pathological gamblers
Common view that ‘vice
’ goods with potential for addiction should
be regulatedGov’t role to protect vulnerable populationsGambling is viewed differently from ice cream, shoes, etc.
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2 Economic benefitsMeasurable benefits include:Tax revenues Employment & wagesEconomic growth/developmentLess-measurable benefits:
Consumer benefits
More entertainment firms competing => lower prices
Higher quality ‘entertainment’ optionsIncreased variety‘Counterfactual’ is important What industry might have otherwise expanded?
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Tax revenuesTaxes are technically transfers of wealthTax revenues are the primary reason for legalization in the U.S.Tax rates on GGR range from 6% to over 60%
CT tribal casinos pay 25% slot revenues to state
DE tax on VLT revenue 62%
ME taxes 16% table games, 39-46% on slotsMD slots taxed at 67%; 20% on table gamesPA slots taxed at 55%Then casinos pay income taxes…Lower tax rates are likely to encourage larger capital investment
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Tax revenues, cont.2011 study showed slightly negative effect of casino revenues on state tax revenuesBut effect is positive when tourism and economic growth effects are considered – indirect tax revenues attributable to casinos
States tax GGR at much
higher
rates (25-30% avg) than sales taxes (6% avg)1-to-1 substitution in spending => casinos increase tax revenues
Lottery ‘tax’ is about 30
%
Lottery and casinos will raise more tax revenue than either alone
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Market saturation?Is the NE market ‘saturated’?Closure of 4 of 12 Atlantic City casinosShould a particular state care about regional saturation?Are casino companies willing to build more?
A great market test of a saturated market
Regulations may need to consider potential future competition
Discussion of lower tax rates in DE, INOther regulatory changes to help stabilize industry
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Casino revenues in NE states10Slide11
Casino taxes paid in NE states11Slide12
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Casino taxes & politicsTaxes from gambling (casinos + lotteries) represent < 5% of revenue in most statesGov’t allows industry to exist, enforces monopoly‘Defensive legalization’Why not keep $ at home?Gambling taxes are ‘voluntary’
‘regressivity’ question is interesting
Fiscal
stress reliefAvoid cutting spending or raising other taxes13Slide14
Employment & wagesDo casinos create new jobs or ‘cannibalize’ jobs in other industries?County-level analysis shows a positive employment effect and minor wage effect from casinosPositive impacts concentrated in entertainment & hospitality sectorsEffect size depends on county size
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Casinos and economic growthSome markets clearly see significant economic growth due to casinosLas VegasMacaoMississippi Gulf CoastIntuition: increased economic activity is the source of economic growthImpacts in other markets not as obvious
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Consumer benefitsRarely discussed in political debate over casinosBenefits mentioned earlierLower prices More variety Higher qualityTourism: new option for potential tourists
Entertainment isn’t tangible, but it benefits consumers
Baseball game tickets
Critics: gambling is a ‘sterile transfer of money’
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3 Economic costs‘Industry cannibalization’Evidence that casinos harm lottery salesRelationship to other industries: ‘market competition’Little evidence of an overall negative impact on other industriesResults could be market-specificAdditional infrastructure requirements
Regulations/taxes typically require casinos to pay for
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Net (measurable) economic impactConsidering just the economic benefitsTax revenuesEmployment & wage effectsConsumer benefitsAnd economic costsInter-industry competition
Gambling industries
Non-gambling industries
Infrastructure costsVery likely to be positive
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4 Social costs of gamblingSocial costs are mostly attributed to pathological gamblersIncome lost from missed workCrime Corruption of public officials Divorce caused by gambling
Bankruptcy
Most ‘costs’ defy monetary measurement
But they’ve been estimated at $10,000Critics claim: Cost:Benefit ratio is 3:1But policymakers need data to help inform decisions…
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ComorbidityMost pathological gamblers have other disordersPetry, Stinson, and Grant (2005, p. 569) find:
74.2% have alcohol use disorders
38.1% have drug use disorders
41.3% have anxiety disorders28.5% have obsessive-compulsive personality disorderHow can ‘social costs of gambling’ be measured when most
pathological gamblers have multiple disorders?
Most
social cost studies ignore this issue
Result is an exaggeration of the social costs attributable to gambling.
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5 Casinos and crimeKey concern about casinos is the potential link to crimePathological gamblers are more likely to commit crimesCasinos attract potential victims with cash and potential criminalsEvidence is mixed, and appears to be dependent upon how ‘crime rate’ is measuredInclude or exclude ‘visitors’?
Reno studies showed areas near casinos are safer
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6 Other concerns Other important concerns defy measurement in cost-benefit analysesCitizens may have concerns about gambling changing the cultureNIMBYMoral concerns about gamblingShould the state condone casino gambling?
What about lottery gambling?
Beer with > 5% ?
Individual freedom and the role of government in restricting industry?These are real considerations that often get ignored in the face of seemingly precise and authoritative data
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Summary of researchGood data, ability to measure economic benefitsEmployment Wages Tax revenuesDifficult to measure consumer benefitsEconomic costs (e.g., industry cannibalization) are more difficult, but still measurable
Social costs are very difficult to measure
Research should focus on
types of harms and their prevalence – not estimating social costs in $23Slide24
Contact InformationDoug WalkerProfessor of EconomicsCollege of Charleston5 Liberty St., Rm. 427
Charleston, SC 29401
Tel: (843) 953-8192
Email: dougwalker2@gmail.comWeb: walkerd.people.cofc.edu
casinonomics.net
Casinonomics
(2013)
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