Social and Economic Impacts to . Consider. Public Hearing Comments. Atlanta, GA. 10 December 2015. Douglas M. Walker, Ph.D.. 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
Professional BackgroundCollege of Charleston (2007-present)Georgia College (1998-2007)Research on socio-economic impacts of gambling2 booksMore than 50 journal articles and book chaptersConsultant for state government agencies, includingFlorida LegislatureMaryland State Lottery and Gaming Control AgencyMassachusetts Gaming CommissionMissouri Office of the Attorney General…and various research agencies and industry groups
Interest in Georgia
Georgia 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expansion would represent large expansion in SE, and could affect politics in South CarolinaInteresting perspectives, outdated research cited during Savannah meeting in Nov.
1 Economic perspective on gambling
Everyone 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 eventEnjoyable and entertaining to some people, not to othersSince the expected value of all casino bets, lotteries, etc., is negative, gambling must provide entertainment valuePsychologists generally view the issues from the perspective of minimizing potential harms from expanded gambling…
Research 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 gamblersCommon 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.
2 Economic benefits
Measurable benefits include:Tax revenues Employment & wagesEconomic growth/developmentLess-measurable benefits:Consumer benefitsMore entertainment firms competing => lower pricesHigher quality ‘entertainment’ optionsIncreased variety‘Counterfactual’ is important What industry might have otherwise expanded?
Taxes 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 stateDE 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
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 casinosStates tax GGR at much higher rates (25-30% avg) than sales taxes (6% avg)1-to-1 substitution in spending => casinos increase tax revenuesLottery ‘tax’ is about 30%Lottery and casinos will raise more tax revenue than either alone
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 marketRegulations may need to consider potential future competition Discussion of lower tax rates in DE, INOther regulatory changes to help stabilize industry
Casino revenues in NE states
Casino taxes paid in NE states
Casino taxes & politics
Taxes 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 interestingFiscal stress reliefAvoid cutting spending or raising other taxes
Employment & wages
Do 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
Casinos and economic growth
Some 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
Rarely discussed in political debate over casinosBenefits mentioned earlierLower prices More variety Higher qualityTourism: new option for potential touristsEntertainment isn’t tangible, but it benefits consumersBaseball game ticketsCritics: gambling is a ‘sterile transfer of money’
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 requirementsRegulations/taxes typically require casinos to pay for
Net (measurable) economic impact
Considering just the economic benefitsTax revenuesEmployment & wage effectsConsumer benefitsAnd economic costsInter-industry competitionGambling industriesNon-gambling industriesInfrastructure costsVery likely to be positive
4 Social costs of gambling
Social costs are mostly attributed to pathological gamblersIncome lost from missed workCrime Corruption of public officials Divorce caused by gamblingBankruptcyMost ‘costs’ defy monetary measurementBut they’ve been estimated at $10,000Critics claim: Cost:Benefit ratio is 3:1But policymakers need data to help inform decisions…
Most pathological gamblers have other disordersPetry, Stinson, and Grant (2005, p. 569) find:74.2% have alcohol use disorders38.1% have drug use disorders41.3% 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 issueResult is an exaggeration of the social costs attributable to gambling.
5 Casinos and crime
Key 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
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
Summary of research
Good data, ability to measure economic benefitsEmployment Wages Tax revenuesDifficult to measure consumer benefitsEconomic costs (e.g., industry cannibalization) are more difficult, but still measurableSocial costs are very difficult to measure Research should focus on types of harms and their prevalence – not estimating social costs in $
Doug WalkerProfessor of EconomicsCollege of Charleston5 Liberty St., Rm. 427Charleston, SC 29401Tel: (843) 953-8192Email: email@example.comWeb: walkerd.people.cofc.edu casinonomics.net
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