Prof: Taxes on casinos would cost government

Gary Thompson

Tuesday, Sept. 10, 1996 | 11:59 a.m.

A just-released study on gaming's economic impact says imposing new federal taxes on the industry would end up costing the government more than it would collect.

The study also concludes that casino gaming has led to more jobs, higher tax revenues and an ultimate reduction in crime wherever it was implemented.

And it predicts that, even if no more states permit casino gaming, expansion of gaming jobs and tax revenues will continue to outpace overall economic growth through the year 2005.

The study was commissioned by International Game Technology, the Reno-based video and slot-machine manufacturer, and conducted by Dr. Michael Evans, professor of economics at Northwestern University.

Evans, a consultant to various nations and such U.S. agencies as NASA, the Treasury Department, the Environmental Protection Agency and the Senate Finance Committee, has written several books and articles on economic trends and forecasting.

Evans said his analysis took a "very conservative approach ... that probably understates the actual economic benefits from casino gaming. These conservative figures are purposefully used to ensure final analysis and projections beyond reproach with opponents of gaming."

The report was released as last-minute jockeying for positions on the federal gaming study panel plays out. President Clinton, Senate Majority Leader Trent Lott and House Speaker Newt Gingrich will each nominate three persons to the commission that will conduct a two-year study of gaming, with emphasis on compulsive gambling and oversight of casinos on tribal lands.

Pro- and anti-gaming forces have been working feverishly to ensure their sides are well-represented on the panel, which some believe may ultimately recommend imposing new taxes on the gaming industry.

If that occurs, said Evans, "The slower growth in the casino gaming industry and hence (in) employment growth would result in a net revenue loss to the government.

"For example, a 4 percent tax on casino gross revenues would raise about $1 billion per year by 2005" -- a figure that would actually approach $2 billion if his estimate of $50.1 billion in revenues is correct -- "but would cut the growth in the casino gaming industry by so much that about $4 billion would be lost in collections of personal and corporate income taxes, Social Security and related taxes and the payment of higher unemployment benefits."

That would occur, Evans said, because an increase in jobs would boost tax collections and reduce jobless benefits, while a rise in economic activity would boost profits and corporate tax payments.

Evans expects U.S. casino revenue growth to slow to about 9.8 percent yearly through 2005 from the 14 percent annual growth rate of the past 10 years.

Though that would outpace the 6 percent annual growth rate he predicts in disposable income for the period, Evans believes gaming revenues will climb at the higher rate because of more aggressive marketing for recreational spending, technology advances, expanded foreign tourism and the aging of the population.

Federal tax receipts from casino gaming would climb to $17.7 billion in 2005 from $5.9 billion in 1995, while state and local tax collections would jump to $37.8 billion from $14.1 billion, he said.

U.S. casino industry employment would rise to 696,000 from 337,000, with another 674,000 indirect jobs generated by the increase in economic activity, Evans said.

The professor also said that, "While the crime rate does sometimes rise soon after casinos have been established, it then declines below the rate that had occurred before the casinos were open."

In Nevada, crime rates in Clark and Washoe counties "used to be well above the national average; the most recent crime rates, adjusted for the number of visitors brought by casino gaming, are now at or below the national average crime rate," he said.

Nevada's economy has risen about 2 percent a year faster than the overall U.S. economy over the past three decades, "due in large part to the expansion of the casino gaming industry," Evans said.

Copies of the study are available from IGT.