For Economic Development, Casinos Don't Pay

While more states are approving commercial casinos in hopes of creating jobs and increasing tax revenues, economists are increasing skeptical of the benefits of legalized gambling.

"Out on the Great Plains, an experiment is under way: Under a new state law legalizing gambling, Kansas City, Kan., could soon be lit up by the first full-blown casino resort in its 135-year history.

If the plans come to fruition, Kansas will be the 13th U.S. state to bet that commercial casinos will prove to be a win-win game, reaping profits for the casino owners and boosting development for their hosts at the same time. "We'll see a big economic benefit," Kansas Gov. Kathleen Sebelius said when she signed the enabling legislation in April.

A growing body of research and experience, however, suggests the odds are not stacked in the state's favor. Some economists go so far as to call casinos a sort of global zero-sum game, in which the outcome for a host city depends on the casino's ability to attract out-of-state tourists and separate them from their money -- a feat that becomes increasingly hard to achieve as more states install casinos of their own."

"States and municipalities typically count the benefits of casinos in terms of jobs and tax revenues. In 2006, commercial casinos employed about 366,000 people and paid about $5.2 billion in direct gaming taxes, according to the American Gaming Association.

More blackjack dealers and gaming taxes, though, don't necessarily add up to growth in economic well-being. For one, casinos often take business from other entertainment venues, such as theaters or sports bars. As a result, some economists -- such as Earl Grinols, a former senior economist on the president's Council of Economic Advisers who now teaches at Baylor University in Texas -- contend that, on average, casinos actually make no net tax contribution. The effect on jobs could actually be negative, because many modern casinos -- replete with slots and video-poker machines -- need fewer employees per customer than the businesses they tend to replace."

[Ed: Although this article is only available to WSJ subscribers, it is available to Planetizen readers for free through the link below for a period of seven days.]

Full Story: Bad Odds

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