Can Gambling Solve State Fiscal Problems? Don't Bet On It

Given voters' universal resistance to higher taxes, state governments have been turning more and more to legalized gambling as a painless way to raise badly needed revenues. The problem with this approach: It's painless because it barely pinches any purses. Lotteries, casinos, and off-track betting just don't raise enough money to reduce a state's reliance on other taxes mr to solve a serious budget problem, according to Steven D. Gold of the Rockefeller Institute of Government at the State University of New York. Gold says lotteries, now legal in 37 states, yielded $7.6 billion in 1991, only 3.2% of total revenues for those states. That figure does not reflect lost sales or excise taxes because people who gambled had less money to spend on other taxable items.

Casinos are the latest fad. Including those on Indian reservations, they operate in 19 states. But they account for a sizable share of revenue only in Nevada (about 50%). In New Jersey, by contrast, casinos bring in less than 4% of total state revenue, says Gold. And pari-mutuel revenue from horse and dog racing and jai alai has fallen because of increased competition from lotteries. The bottom line for politicians: If you need to raise revenue, you'll have to do it the old-fashioned way--by hiking taxes.

You might like: