BETTING ON CASINO REVENUES BETTING ON CASINO REVENUES: LESSONS FROM STATE EXPERIENCES RANJANA G. MADHUSUDHAN * Abstract - This paper focuses on the issues and options with casino gaming as a state and local response to changed fiscal environments. Lessons from casino states, primarily New Jersey, are examined. Casinos account for the bulk of wagering in the United States, and the casino fever is likely to continue. Casinos can provide major economic benefits; however, casino revenues represent a limited and unstable revenue base. Policymakers have to weigh all the social costs against potential benefits. More research needs to be done to assess the true cost and benefit potentials of the casino option. This discussion will focus on the issues and options with casino gaming as a state and local response to changed fiscal environments. Legalized gaming is widespread throughout the United States and is growing at a rapid pace. In 1994, total wagering in the United States increased 22.3 percent to a * Office of Tax Analysis, New Jersey Department of Treasury, Trenton, NJ 08646. record $482 billion. 1 The total wagered on casinos alone nearly quadrupled since the early eighties. In the remaining discussion, I will track the extent of casino fever in the United States and concentrate on the casino industry in New Jersey. First, the current industry profile will be outlined, indicating recent changes in 1994 and 1995. Second, the historical profile will be tracked over the 18-year period, between 1978 and 1995. Major issues with casino revenues will be discussed in the next section. Lessons from casino states, primarily the New Jersey casinolegalization experience, will be highlighted in the section preceding the Conclusions. CASINO FEVER Casinos account for the bulk of total wagering in the United States. For instance, nearly 85 percent of total wagering in 1994, or $407 billion, was on all types of casinos, including Indian casinos. Prior to 1990, only two states had legalized on-land casino gaming. In 1931, Nevada became the first state to legalize casinos statewide. In 1977, New Jersey became the second state, 401
NATIONAL TAX JOURNAL VOL. XLIX NO. 3 but unlike Nevada, casinos were legalized only in Atlantic City and are not allowed statewide. Since 1991, the number of states with some form of casino gaming has increased dramatically to 34. Riverboat casinos and tribal gaming are rapidly spreading the casino fever in the 1990s. The year 1991 marked the first year that riverboat casinos began plying the waters of the upper Mississippi river in Iowa and Illinois. In 1994, there were 57 riverboats operating in five states Illinois, Iowa, Mississippi, Missouri, and Louisiana. The riverboat casino sector was the fastest growing component of the casino industry, generating over three billion dollars in casino win, accounting for over one-fifth of the non-indian casino market in 1994. The first riverboat just opened in Indiana in December, 1995. Industry analysts expect the riverboat casino wave to continue, particularly, with limited licensing. Indian gaming also appears to be surging. More than three-fourths of the states that currently have some form of casino gaming offer Indian gaming. 2 During 1994, $41 billion were wagered in Indian casinos, accounting for around a 16 percent market share. According to a recent GAO estimate, there are 237 Indian gaming operations, including 119 tribal casinos, in 29 states. 3 CASINO GAMING IN NEW JERSEY 4 As noted earlier, casino gambling in New Jersey was legalized in 1977 as an economic development tool primarily charged to revitalize Atlantic City. In a recent Wall Street Journal editorial, Governor Whitman noted that the casino industry is a major economic force providing enormous benefits to New Jersey. 5 With the passage of 18 years, it is now time to review the role of the casino industry in the state. 6 The first casino, Resorts International, opened in 1978. In 1995, there were 12 casinos operating in Atlantic City. The arrival of The Trump World s Fair in May 1996 marks the first addition in six years to the casino base in Atlantic City. 7 The industry offered 1,347 table games and 30,167 slot machines in 1995. Slot machines contributed to nearly 69 percent of casino revenues or win with the remaining 31 percent being accounted by table games in 1995. Casino square footage in 1995 was 890,081, up by six percent over 1994. The industry invested heavily and employed more than 40,763 full-time employees in 1995. Total casino-related employment represents over two-thirds of total gaming-related employment in the state. In addition, the industry creates thousands of jobs indirectly, including jobs in various state agencies that regulate the industry, such as the Casino Control Commission and the Division of Gaming Enforcement. The casino industry spent over one billion dollars in total wages and benefit costs in 1995. By contrast, during 1977, the year before the introduction of casino gaming, the wages paid by the entire local hotel industry were $16 million. The industry s annual purchase of more than $2.2 billion of goods and services also generates indirect income benefits to the state. The casino industry contributes significantly to tourism in New Jersey, which generates state revenues and is one of the major employers in the state. In 1995, travel and tourism expenditures in the state totaled $22.9 billion. 8 With over 33.3 million visitor-trips, Atlantic City remains one of the most visited 402
BETTING ON CASINO REVENUES tourist destinations in the United States. Visitors to Atlantic City are estimated to have plunked down in excess of $2.7 billion in Atlantic City casinos. CASINO TAXES IN NEW JERSEY Over $940 million of gaming revenues were generated in New Jersey during FY1995, of which 31 percent came from casinos (lotteries contributed around $647.8 million and the balance of 3 million dollars came from pari-mutuel and other gaming sources). 9 During the first 18 years of operation in Atlantic City, the casino industry paid close to five billion dollars in direct taxes and fees to state, county, and local governments. The breakdown of state and local taxes paid by the casino industry between 1978 and 1995 is shown in Table 1. The current structure of casino taxes in New Jersey is presented in Table 2. Casinos are subject to the Casino Revenue Tax and the Investment Alternative Tax. The former is levied at eight percent of gross gaming revenues, defined as the total sum received from gaming operations minus the amount paid out as winnings, adjusted for uncollectible patron checks. The tax is administered by the Casino Control Commission. Revenues from this tax are deposited into the Casino Revenue Fund (CRF) and dedicated for use in supporting programs for the elderly and for disabled persons. The tax yield was $288.8 million in FY1995 (see Table 2 and Chart 1). The Investment Alternative Tax, designed to encourage investments by casinos, is imposed at the rate of 2.5 percent of gross revenues. Alternatively, the casinos have the option of allocating 1.25 percent of gross revenues either to purchase Casino Reinvestment Development Authority (CRDA) bonds or 2 to invest directly in CRDA approved projects. Proceeds are used to revitalize the Atlantic City and Atlantic County regions 2 and then distributed under a formula to other areas of the state. Approximately $46.6 million of investment alternative tax obligations were incurred during 1995, representing an increase of 9.6 percent over the 1994 level. As of December 1995, total CRDA investment throughout the state was $446.5 million, of which nearly $347 million went to Atlantic City. 1 TABLE 1 CASINO INDUSTRY TAXES, REGULATORY FEES AND REINVESTMENT OBLIGATIONS (SELECTED YEARS) 1978 1995 1978 1995 Direct Taxes 1Casino Revenue Tax a 10.7 298.3 3,157.6 Atlantic City, Atlantic County, and school property taxes 2.3 157.4 1,235.2 federal corporate tax 36.4 61.0 861.9 Social Security 2.2 88.7 939.6 state corporate taxes 6.5 15.3 278.2 state unemployment tax 1.3 31.6 283.5 federal unemployment tax 0.1 2.8 44.2 Total Direct Taxes 59.5 655.1 6,800.2 Regulatory fees b 3.1 51.2 733.8 Reinvestment obligations 0.0 46.6 484.8 Total all taxes and fees 62.6 752.9 8,018.8 Source: Casino Association of New Jersey. Amounts in $M. a Excludes interest. b Includes casino and employee licensing fees. Amounts refer to fiscal year. 403
NATIONAL TAX JOURNAL VOL. XLIX NO. 3 3 404
BETTING ON CASINO REVENUES 405
NATIONAL TAX JOURNAL VOL. XLIX NO. 3 CHART 1. CRF Appropriations by Major Programs The casino industry is also subject to various licensing fees on casinos, slot machines, and casino employees (see Table 2 for details). Fees are assessed and collected by the Casino Control Commission. Proceeds from fees are deposited into the Casino Control Fund to pay for the operating expenses of the Casino Control Commission and the Division of Gaming Enforcement. 10 A total of nearly $53.6 million was collected in FY1995. The casinos also are the major source of the Atlantic City Luxury Sales Tax, which is levied only in Atlantic City on entertainment, hotel rooms, and alcohol sold by the drink. Over $200 million was collected between FY1981, the first year levied, and FY1995. The tax is dedicated to support debt service and operating deficits of the Atlantic City Convention Center and other projects undertaken by the Atlantic County Improvement Authority. In FY1995, $16 million was collected under this tax. As of July 1993, casinos are also required to impose a minimum parking fee of two dollars per motor vehicle using casino parking facilities. The revenues are dedicated for the redevelopment of the Atlantic City corridor area through the administration of the CRDA. During 1995, a total of $15.6 million was collected in Atlantic City casino parking fees. In addition to the above casino taxes and fees, the industry also pays other state and local taxes. As indicated in Table 1, the casino industry paid over $204 million in 1995 for other state and local taxes, the bulk, $157.4 million, for local property taxes and the remaining for state corporate and unemployment 406
BETTING ON CASINO REVENUES taxes. New Jersey casinos also paid $152.5 million in Social Security, federal corporate, and unemployment taxes. CASINO REVENUES TREND AND POLICY ISSUES 11 Revenue Trend Overall, gaming revenues increased nearly eightfold in New Jersey between FY1978 and FY1995. Casino tax revenues experienced a dramatic growth from $1.5 million in FY1978 (when the first casino opened) to $288.8 million in FY1995. For the most part, the growth in gaming revenues has been led by the growth in casino revenues. Lottery revenues also increased substantially during this period. However, pari-mutuel tax revenues have been a steadily declining component of gaming revenues in New Jersey. Most casino states have generally experienced growing gross gaming revenues which constitute the state tax base. For instance, states with gross casino win over one billion reported solid growth rates, in double-digits, in 1995. The riverboat casino states generally reported more impressive triple-digit growth rates, as demonstrated by Louisiana (477 percent) and Missouri (304 percent). 12 Limited Revenue Base However, gaming revenues in general and casino revenues in particular constitute a limited revenue base. Despite the popularity enjoyed, being interpreted as a voluntary and painless tax, gaming revenues have accounted for only about three to seven percent of state general revenues in New Jersey. Lottery revenues, the prime component of gaming revenues, contributed around four percent of state general revenues in FY1995. The casino revenue tax contributed around three percent of state general revenues in that year. The casino percent share increases slightly when other state and local taxes and fees are included. Thus, gaming revenues represent a limited source of state finances. The newer casino states, particularly those with riverboats, also report a similar pattern. In 1995, the percentage share of casino revenues was among the highest in Louisiana. Unstable Revenue Base Gaming revenues, particularly casino revenues, have been unstable and appear to be cyclically sensitive as well. The casino industry, for instance, was adversely affected during the national recession years in the eighties and nineties, when the Northeast region took a big hit. This is clearly reflected by the wide fluctuations in the annual percentage change in casino revenues during this period. This is also reflected, in part, in the fluctuating annual visitor volume in Atlantic City. Inefficient and Expensive Revenue Source Gaming revenues are an inefficient revenue source and are expensive to administer. Various regulatory bodies have been created in the state to ensure proper enforcement of gaming and to maintain the integrity of the gaming industry. Over $53 million were earmarked in FY1995 to meet the operating expenses of the Casino Control Commission and the Division of Gaming Enforcement in New Jersey. Colorado spent nearly seven million (or 14 percent) from its Limited Gaming Fund for Division of Gaming and Commission expenses. Illinois s operating expenses were among the lowest in 1995. 407
NATIONAL TAX JOURNAL VOL. XLIX NO. 3 High Tax Rate and Unequal Distribution of Tax Burden A prime determinant of gambling revenues is the take-out rate, which is the fraction of the total bet retained by the state. The implicit tax rates on commercial games of pure chance vary depending on the take-out rates. If it can be assumed that expenditures on gambling are highly concentrated, then the associated tax burden is expected to be unequally distributed, as the distribution of the tax burden will be concentrated as well. While designing the gaming taxes, states would need to be mindful of any disparities between gaming and other sin tax rates. On equity grounds, all sinful activities with alleged negative social externalities, drinking, smoking, and gambling, should be treated equally. Regressivity Unfortunately, there are very little data on the demographics of casino players in general and those in New Jersey in particular. According to a recent survey by Harrah s Entertainment Inc. (1996), in comparison to the average American, casino players tend to have higher levels of income and education and are more likely to hold white-collar jobs. This is most likely for traditional destination playing, which often requires travel and overnight stays, more affordable by affluent players. However, an examination of local players at low-stake facilities, including slot machines, is more likely to reflect a regressive distribution. It appears that most forms of gambling attract betting by lowincome people in greater proportion to income than by high-income people and, hence, represent a highly regressive source of revenue. As casino gambling becomes more widespread and easily accessible, it will become increasingly regressive. However, given that the potential yield of casino revenues is small in proportion to total revenue, they would produce only a minor alteration of the progressivity of the total state and local revenue structure. 13 Non-Neutrality When winnings from different gaming activities are taxed differently, as is the case in New Jersey where lottery winnings are exempt, tax neutrality is violated. Lotteries compete with horse racing and other games of chance played at casinos. To the extent this structure of gambling taxes interferes with the gambler s decision making and the allocation of the so-called finitegambling-dollar, tax neutrality would be distorted. In part because of the disparate involvement of the state across the gambling industry, ranging from state provision (lottery) to state control (casino), gambling decisions are likely to be tampered with. Any interference would violate the neutrality criterion. Uncertain Future The future potential of gaming revenues is somewhat uncertain. Game portfolios significantly affect sale and consequently revenues to the state. The casino industry in New Jersey has been introducing new games such as Keno to attract players. However, competition among different forms of gambling may limit efforts to promote any one form. The decline in pari-mutuel revenues in general is blamed on lotteries and casinos. In some states, casinos are also reported as cannibalizing lottery and other state and local revenues. 14 The 408
BETTING ON CASINO REVENUES substitution potential between different forms of gaming activities tends to increase the advertising and operational costs associated particularly with state lotteries. Interstate Competition As more states, particularly neighboring states, legalize casino gaming, the future of Atlantic City will become more uncertain. The case of Illinois is illustrative. For instance, revenues and admissions declined markedly in 1995 in two riverboat casinos, which felt the direct negative impact of nearby out-of-state gaming competition along the Mississippi river. The unsuccessful experiment with the New Orleans casino provides yet another example of the uncertain future of casino revenues. Earmarking All casino revenues are earmarked in New Jersey. Over $330 million were appropriated from the casino revenue fund, in FY1995, to benefit eligible senior and disabled citizens in New Jersey. Pharmaceutical Assistance to the Elderly and Disabled was the largest program accounting for the bulk of appropriations in FY1995 (see Chart 1). Most states earmark gaming revenues to increase the political appeal and win public approval. However, some of the newer casino states appear to be earmarking a lower percentage of their casino revenues. For instance, in Colorado, only two-fifths of the casino revenues were for dedicated use. Iowa is an interesting example with a very small percentage earmarked, the remaining going into the state general fund. The downside of earmarking is the rigidity it introduces in the budgetary process. Any deficit in such funding tends to threaten the continuity in socially desirable programs while, unused year-end balances cause suboptimal use of earmarked funds. During several budget years, New Jersey has experienced substantial year-end unused balances in earmarked funds. Proper cost projections and program design are necessary to avoid this problem. Exportability A segmented casino industry market has helped New Jersey casinos enjoy a large chunk of casino patrons, particularly from the Northeastern states. The large out-of-state patron base has enabled New Jersey to export some of its casino tax burden to other states. In Louisiana, riverboat casinos, in the Lake Charles and Shreveport/Bossier areas, are also attempting to attract the Texas population. The size of gains from the casino option will depend to a large extent on the potential to attract tourists, particularly from out of state. However, as more neighboring states adopt the casino option, there will be limits to exportability. Social Costs One of the most serious issues raised under the casino option relates to social costs. Compulsive gambling and crime potentials are believed to be associated with gambling activities. However, conflicting results are reported in studies on casinos and crime. Atlantic City is reported to have experienced an increase in crime after the casinos were legalized. However, according to a more recent study, crime rates, adjusted for tourists, were higher in several cities in Florida, which does not have casino gaming. 15 There appears to be some disagreement on whether the increased availability of gambling increases the 409
NATIONAL TAX JOURNAL VOL. XLIX NO. 3 number of problem gamblers. 16 However, there is also the fear of increase in induced gambling as states enter into the provision and promotion of gaming activities to meet their revenue needs. Another social cost to bear in mind is the potential threat of money laundering as the casino fever continues to spread rapidly. 17 There are other costs imposed by casinos on state and local governments, such as those related to infrastructure and law enforcement. For instance, the future of the proposed $750 million Mirage casino-hotel and other major gaming attractions hinges on New Jersey s commitment to pay for the tunnel project which would connect the Expressway and the new Convention Center to the proposed resort site. 18 Any disruption to the local economy would also increase the cost of the casino option. 19 LESSONS FOR OTHER STATES There are lessons to be learned from the casino experiences of Nevada and New Jersey, the two major land-based casino states, and the relatively new riverboat casino states. Nevada s case illustrates that casinos have played a major role in developing tourism which is the prime mover of the Nevada economy. However, the gaming industry is playing a lesser role now with the advent of diversification of the Nevada economy. Lessons from the New Jersey experience are probably more relevant to other states that are considering the casino option. This is because New Jersey has restricted casino gaming; statewide casino gaming, an unlikely scenario elsewhere, makes Nevada unique. Thus, only small-scale casino gaming as in Atlantic City is likely to be introduced in other states. This trend is reflected in recent legislative bills passed by states. Another factor that makes the New Jersey case more interesting is that casinos were legalized after the introduction of lotteries. Most states that are considering the casino option also have lotteries, and they have the New Jersey experience to learn from. 20 Nevada is not yet a lottery state. In the 18 years since their legalization, casinos have had a significant economic impact in New Jersey, particularly in Atlantic County. However, given the existing infrastructural and environmental constraints, including the lack of modern air travel facilities, a poor city environment, and the absence of major nongaming tourist attractions, Atlantic City is far from being revitalized into a major tourist destination resort. The original goal of revitalizing the city has not yet been accomplished. Recently, efforts have been made to plough back some of the casino revenues into Atlantic City to support its much needed redevelopment. The upcoming Convention Center and the Corridor projects are examples. Several existing casino hotels have launched major renovation and expansion projects. According to the 1995 CRDA report, there are 3,470 new hotel rooms in approved expansion projects, with a total construction cost of $494 million. A greater public-private coordination would strengthen tourism in the City. Casinos are no magic wands. 21 The City needs diversification, development of nongaming tourist attractions, and improved amenities in order to be revitalized. However, with the recent changes in casino regulations and good industry results, there is a lot of new interest, and Atlantic City appears to be all set for a major economic liftoff. 410
BETTING ON CASINO REVENUES Conclusions The casino fever is likely to continue because it promises jobs and revenue and because of the growing popular interest in recreational gambling. Even economists would agree, ignoring pesky issues of social costs, that the bundling of legalization and taxation does indeed lead to a net improvement in social wellbeing, since consumers voluntarily consume a service that did not previously exist. 22 There is no doubt that social acceptance of gambling has increased and gaming is more institutionalized today. 23 The policymakers have to decide on the tough question of how much the state should rely on gambling to provide state revenues? Currently, as noted earlier, gaming revenues in general and casino revenues in particular contribute a small and unstable fraction of state general revenues. In recent years, the share of casino revenues is actually declining in Nevada. Even though casino taxes are an attractive source in that the burden is easily exported, this potential will get weaker if more states legalize casinos. Competition among different forms of gambling may limit efforts to promote any one form. Regulatory costs would rise with the introduction of more casinos. Unlimited license environment, as in Mississippi, may decline returns to the state. Gambling is not a fiscal panacea, and it would be foolish to expect it to provide much in the way of budgetary relief. 24 Regressivity associated with gaming activities is another important policy concern. The success of introducing casino gaming as an economic development and fiscal tool in any state also hinges on a well-coordinated development plan, involving the state and the private sector, and requires the provision of nongaming tourist attractions as well. While considering the casino option, states must also weigh the prospective gains against social costs, such as the increase in compulsive and juvenile gambling and crimes associated with gambling in general. Above all, and regardless of the motivation behind the legalization of casino gaming by states, the first objective should be to keep the integrity of the casino industry intact. In the meantime, while state and local governments are busy exploring the casino option, more efforts need to be directed toward evaluating reliable answers about the true costs and benefits of casino gambling. The proposed National Gambling Impact and Policy Commission would be a good starting place to launch an indepth study of this kind. More research also needs to be directed specifically at the state and local levels. The potential for gaming in cyberspace will also raise newer policy concerns in the future. ENDNOTES The views expressed are those of the author and do not necessarily represent the views of the Division of Taxation or the Department of Treasury. The author would like to thank Robert Tannenwald for helpful comments. 1 See Christiansen/Cummings Associates, Inc. (August, 1995). Most of the industry statistics are based on this source. See also International Gaming & Wagering Business (July, 1995). 2 Foxwoods in Connecticut, which is operated by the Mashentucket Pequot Indian tribe, provides the most successful example of Indian gaming in the United States. 3 See GAO Report (January, 1996) for details. 4 For a comparison of casino gaming in New Jersey and Nevada, refer to Madhusudhan (1989). 5 See editorial section in the Wall Street Journal, May 10, 1996. 6 The industry statistics were obtained from the Casino Control Commission, The Casino Reinvestment Development Authority, the Casino Association of New Jersey, and the New Jersey Office of Management and Budget. 411
NATIONAL TAX JOURNAL VOL. XLIX NO. 3 7 The new casino was renovated by Donald Trump as part of the Trump Plaza expansion project. 8 New Jersey Department of Travel and Tourism. 9 Casino revenues are from the eight percent gross revenue tax. 10 The first $600,000 in any fines assessed per year are to be used for programs on problem gambling. Any excess over this amount is to be directed to the CRF. 11 This section is an update and expansion of a background report, New Jersey Gaming Revenues: Issues and Options (January, 1988) prepared for the New Jersey State Revenue and Expenditure Policy Commission and a more recent report by Madhusudhan in the FRB Boston Proceedings, 1995. 12 From Illinois Gaming Board Annual Report, 1995. 13 See Suits (1977). 14 See the case of Illinois in State Tax Notes, February 14, 1994. 15 The Kleindienst (1994) Florida study was mentioned in the February, 1995 issue of the NCSL Legislative Brief. 16 According to a 1993 Gallup survey, approximately five percent may be categorized as problem gamblers in New Jersey. 17 In a recent report, the GAO examines the potential for money laundering and recommends several measures to deter and check such undesirable trends. 18 Refer to The Times, April 29, 1996, for details on proposed expansion plans in Atlantic City. 19 See Sternlib and Hughes (1983) for a report on Atlantic City. 20 Mississippi, which has legalized riverboat casinos, is an interesting exception. 21 See Gold (1995). 22 See Clotfelter (1995). 23 As reported in USA Today (May 20, 1996), the gaming industry is hunting for the next-generation slot machine games using some of America s brightest and highly trained persons. 24 See Suits (1977). REFERENCES 12 Plus 1 Equals 12 in Trump Math. The Times, Atlantic City (April 29, 1996): C2. Christiansen/Cummings Associates Inc. Gross Annual Wager of the United States. International Gaming & Wagering Business 16 No. 8 (August, 1995): 29 68. Clotfelter, Charles T. The Promise of Public Revenue from Casinos. In Casino Development: How Would Casinos Affect New England s Economy?, edited by Robert Tannenwald. Boston: Federal Reserve Bank of Boston, 1995. Colorado Division of Gaming. Gaming in Colorado, Fact Book & 1995 Abstract. DRP 9566 (11/95), Denver, Colorado, 1996. Gambling in America. The Wall Street Journal, editorial (May 10, 1996): A10. Giertz, J. Fred, and Therese J. McGuire. Lottery Sales Down by $71 Million. State Tax Notes 6 No. 7 (February, 1994): 396. Gold, Steven D. Casinos Are No Panacea for Ailing State Budgets. In Casino Development: How Would Casinos Affect New England s Economy? Boston: Federal Reserve Bank of Boston, 1995. Harrah s Entertainment Inc. Harrah s Survey of Casino Entertainment: 1996. Memphis: Harrah s Entertainment Inc., 1996. Illinois Gaming Board. 1995 Annual Report. Springfield, IL: State of Illinois, 1996. International Gaming & Wagering Business. North American Gaming Report 1995. New York: BMT Communications, Inc., July 1, 1995. Kleindienst, Linda. Reports Conflict on Whether Casinos Will Increase Crime. Fort Lauderdale Sun-Sentinel (September 27, 1994). Madhusudhan, Ranjana G. Gambling Fever in America and the Implications for State and Local Finances. In Proceedings of the Eighty- Second Annual Conference on Taxation. Altanta: National Tax Association Tax Institute of America, 1989. Madhusudhan, Ranjana G. Implications of Legalized Gambling for State and Local Finances: The Case of New Jersey. In Casino Development: How Would Casinos Affect New England s Economy? Boston: Federal Reserve Bank of Boston, 1995. National Council of State Legislature. Legislative Brief 3 No. 6 (February, 1995). (The NCSL also provided data on the phone.) New Jersey State and Local Expenditure and Revenue Policy Commission. New Jersey Gaming Revenues: Issues and Options. Background report prepared by Ranjana G. Madhusudhan, Trenton, January, 1988. Sternlib, George, and James Hughes. The Atlantic City Gamble. Cambridge, MA: The Harvard University Press, 1983. Suits, Daniel B. Gambling Taxes: Regressivity and Revenue Potential. National Tax Journal 30 No. 1 (March, 1977): 19 35. U.S. General Accounting Office. Money Laundering: Rapid Growth of Casinos Makes Them Vulnerable. GAO/GGD-96-28, Washington, D.C., January, 1996. 412
BETTING ON CASINO REVENUES BETTING ON CASINO REVENUES: LESSONS FROM STATE EXPERIENCES RANJANA G. MADHUSUDHAN * Abstract - This paper focuses on the issues and options with casino gaming as a state and local response to changed fiscal environments. Lessons from casino states, primarily New Jersey, are examined. Casinos account for the bulk of wagering in the United States, and the casino fever is likely to continue. Casinos can provide major economic benefits; however, casino revenues represent a limited and unstable revenue base. Policymakers have to weigh all the social costs against potential benefits. More research needs to be done to assess the true cost and benefit potentials of the casino option. This discussion will focus on the issues and options with casino gaming as a state and local response to changed fiscal environments. Legalized gaming is widespread throughout the United States and is growing at a rapid pace. In 1994, total wagering in the United States increased 22.3 percent to a * Office of Tax Analysis, New Jersey Department of Treasury, Trenton, NJ 08646. record $482 billion. 1 The total wagered on casinos alone nearly quadrupled since the early eighties. In the remaining discussion, I will track the extent of casino fever in the United States and concentrate on the casino industry in New Jersey. First, the current industry profile will be outlined, indicating recent changes in 1994 and 1995. Second, the historical profile will be tracked over the 18-year period, between 1978 and 1995. Major issues with casino revenues will be discussed in the next section. Lessons from casino states, primarily the New Jersey casinolegalization experience, will be highlighted in the section preceding the Conclusions. CASINO FEVER Casinos account for the bulk of total wagering in the United States. For instance, nearly 85 percent of total wagering in 1994, or $407 billion, was on all types of casinos, including Indian casinos. Prior to 1990, only two states had legalized on-land casino gaming. In 1931, Nevada became the first state to legalize casinos statewide. In 1977, New Jersey became the second state, 401
NATIONAL TAX JOURNAL VOL. XLIX NO. 3 but unlike Nevada, casinos were legalized only in Atlantic City and are not allowed statewide. Since 1991, the number of states with some form of casino gaming has increased dramatically to 34. Riverboat casinos and tribal gaming are rapidly spreading the casino fever in the 1990s. The year 1991 marked the first year that riverboat casinos began plying the waters of the upper Mississippi river in Iowa and Illinois. In 1994, there were 57 riverboats operating in five states Illinois, Iowa, Mississippi, Missouri, and Louisiana. The riverboat casino sector was the fastest growing component of the casino industry, generating over three billion dollars in casino win, accounting for over one-fifth of the non-indian casino market in 1994. The first riverboat just opened in Indiana in December, 1995. Industry analysts expect the riverboat casino wave to continue, particularly, with limited licensing. Indian gaming also appears to be surging. More than three-fourths of the states that currently have some form of casino gaming offer Indian gaming. 2 During 1994, $41 billion were wagered in Indian casinos, accounting for around a 16 percent market share. According to a recent GAO estimate, there are 237 Indian gaming operations, including 119 tribal casinos, in 29 states. 3 CASINO GAMING IN NEW JERSEY 4 As noted earlier, casino gambling in New Jersey was legalized in 1977 as an economic development tool primarily charged to revitalize Atlantic City. In a recent Wall Street Journal editorial, Governor Whitman noted that the casino industry is a major economic force providing enormous benefits to New Jersey. 5 With the passage of 18 years, it is now time to review the role of the casino industry in the state. 6 The first casino, Resorts International, opened in 1978. In 1995, there were 12 casinos operating in Atlantic City. The arrival of The Trump World s Fair in May 1996 marks the first addition in six years to the casino base in Atlantic City. 7 The industry offered 1,347 table games and 30,167 slot machines in 1995. Slot machines contributed to nearly 69 percent of casino revenues or win with the remaining 31 percent being accounted by table games in 1995. Casino square footage in 1995 was 890,081, up by six percent over 1994. The industry invested heavily and employed more than 40,763 full-time employees in 1995. Total casino-related employment represents over two-thirds of total gaming-related employment in the state. In addition, the industry creates thousands of jobs indirectly, including jobs in various state agencies that regulate the industry, such as the Casino Control Commission and the Division of Gaming Enforcement. The casino industry spent over one billion dollars in total wages and benefit costs in 1995. By contrast, during 1977, the year before the introduction of casino gaming, the wages paid by the entire local hotel industry were $16 million. The industry s annual purchase of more than $2.2 billion of goods and services also generates indirect income benefits to the state. The casino industry contributes significantly to tourism in New Jersey, which generates state revenues and is one of the major employers in the state. In 1995, travel and tourism expenditures in the state totaled $22.9 billion. 8 With over 33.3 million visitor-trips, Atlantic City remains one of the most visited 402
BETTING ON CASINO REVENUES tourist destinations in the United States. Visitors to Atlantic City are estimated to have plunked down in excess of $2.7 billion in Atlantic City casinos. CASINO TAXES IN NEW JERSEY Over $940 million of gaming revenues were generated in New Jersey during FY1995, of which 31 percent came from casinos (lotteries contributed around $647.8 million and the balance of 3 million dollars came from pari-mutuel and other gaming sources). 9 During the first 18 years of operation in Atlantic City, the casino industry paid close to five billion dollars in direct taxes and fees to state, county, and local governments. The breakdown of state and local taxes paid by the casino industry between 1978 and 1995 is shown in Table 1. The current structure of casino taxes in New Jersey is presented in Table 2. Casinos are subject to the Casino Revenue Tax and the Investment Alternative Tax. The former is levied at eight percent of gross gaming revenues, defined as the total sum received from gaming operations minus the amount paid out as winnings, adjusted for uncollectible patron checks. The tax is administered by the Casino Control Commission. Revenues from this tax are deposited into the Casino Revenue Fund (CRF) and dedicated for use in supporting programs for the elderly and for disabled persons. The tax yield was $288.8 million in FY1995 (see Table 2 and Chart 1). The Investment Alternative Tax, designed to encourage investments by casinos, is imposed at the rate of 2.5 percent of gross revenues. Alternatively, the casinos have the option of allocating 1.25 percent of gross revenues either to purchase Casino Reinvestment Development Authority (CRDA) bonds or 2 to invest directly in CRDA approved projects. Proceeds are used to revitalize the Atlantic City and Atlantic County regions 2 and then distributed under a formula to other areas of the state. Approximately $46.6 million of investment alternative tax obligations were incurred during 1995, representing an increase of 9.6 percent over the 1994 level. As of December 1995, total CRDA investment throughout the state was $446.5 million, of which nearly $347 million went to Atlantic City. 1 TABLE 1 CASINO INDUSTRY TAXES, REGULATORY FEES AND REINVESTMENT OBLIGATIONS (SELECTED YEARS) 1978 1995 1978 1995 Direct Taxes 1Casino Revenue Tax a 10.7 298.3 3,157.6 Atlantic City, Atlantic County, and school property taxes 2.3 157.4 1,235.2 federal corporate tax 36.4 61.0 861.9 Social Security 2.2 88.7 939.6 state corporate taxes 6.5 15.3 278.2 state unemployment tax 1.3 31.6 283.5 federal unemployment tax 0.1 2.8 44.2 Total Direct Taxes 59.5 655.1 6,800.2 Regulatory fees b 3.1 51.2 733.8 Reinvestment obligations 0.0 46.6 484.8 Total all taxes and fees 62.6 752.9 8,018.8 Source: Casino Association of New Jersey. Amounts in $M. a Excludes interest. b Includes casino and employee licensing fees. Amounts refer to fiscal year. 403
NATIONAL TAX JOURNAL VOL. XLIX NO. 3 3 404
BETTING ON CASINO REVENUES 405
NATIONAL TAX JOURNAL VOL. XLIX NO. 3 CHART 1. CRF Appropriations by Major Programs The casino industry is also subject to various licensing fees on casinos, slot machines, and casino employees (see Table 2 for details). Fees are assessed and collected by the Casino Control Commission. Proceeds from fees are deposited into the Casino Control Fund to pay for the operating expenses of the Casino Control Commission and the Division of Gaming Enforcement. 10 A total of nearly $53.6 million was collected in FY1995. The casinos also are the major source of the Atlantic City Luxury Sales Tax, which is levied only in Atlantic City on entertainment, hotel rooms, and alcohol sold by the drink. Over $200 million was collected between FY1981, the first year levied, and FY1995. The tax is dedicated to support debt service and operating deficits of the Atlantic City Convention Center and other projects undertaken by the Atlantic County Improvement Authority. In FY1995, $16 million was collected under this tax. As of July 1993, casinos are also required to impose a minimum parking fee of two dollars per motor vehicle using casino parking facilities. The revenues are dedicated for the redevelopment of the Atlantic City corridor area through the administration of the CRDA. During 1995, a total of $15.6 million was collected in Atlantic City casino parking fees. In addition to the above casino taxes and fees, the industry also pays other state and local taxes. As indicated in Table 1, the casino industry paid over $204 million in 1995 for other state and local taxes, the bulk, $157.4 million, for local property taxes and the remaining for state corporate and unemployment 406
BETTING ON CASINO REVENUES taxes. New Jersey casinos also paid $152.5 million in Social Security, federal corporate, and unemployment taxes. CASINO REVENUES TREND AND POLICY ISSUES 11 Revenue Trend Overall, gaming revenues increased nearly eightfold in New Jersey between FY1978 and FY1995. Casino tax revenues experienced a dramatic growth from $1.5 million in FY1978 (when the first casino opened) to $288.8 million in FY1995. For the most part, the growth in gaming revenues has been led by the growth in casino revenues. Lottery revenues also increased substantially during this period. However, pari-mutuel tax revenues have been a steadily declining component of gaming revenues in New Jersey. Most casino states have generally experienced growing gross gaming revenues which constitute the state tax base. For instance, states with gross casino win over one billion reported solid growth rates, in double-digits, in 1995. The riverboat casino states generally reported more impressive triple-digit growth rates, as demonstrated by Louisiana (477 percent) and Missouri (304 percent). 12 Limited Revenue Base However, gaming revenues in general and casino revenues in particular constitute a limited revenue base. Despite the popularity enjoyed, being interpreted as a voluntary and painless tax, gaming revenues have accounted for only about three to seven percent of state general revenues in New Jersey. Lottery revenues, the prime component of gaming revenues, contributed around four percent of state general revenues in FY1995. The casino revenue tax contributed around three percent of state general revenues in that year. The casino percent share increases slightly when other state and local taxes and fees are included. Thus, gaming revenues represent a limited source of state finances. The newer casino states, particularly those with riverboats, also report a similar pattern. In 1995, the percentage share of casino revenues was among the highest in Louisiana. Unstable Revenue Base Gaming revenues, particularly casino revenues, have been unstable and appear to be cyclically sensitive as well. The casino industry, for instance, was adversely affected during the national recession years in the eighties and nineties, when the Northeast region took a big hit. This is clearly reflected by the wide fluctuations in the annual percentage change in casino revenues during this period. This is also reflected, in part, in the fluctuating annual visitor volume in Atlantic City. Inefficient and Expensive Revenue Source Gaming revenues are an inefficient revenue source and are expensive to administer. Various regulatory bodies have been created in the state to ensure proper enforcement of gaming and to maintain the integrity of the gaming industry. Over $53 million were earmarked in FY1995 to meet the operating expenses of the Casino Control Commission and the Division of Gaming Enforcement in New Jersey. Colorado spent nearly seven million (or 14 percent) from its Limited Gaming Fund for Division of Gaming and Commission expenses. Illinois s operating expenses were among the lowest in 1995. 407
NATIONAL TAX JOURNAL VOL. XLIX NO. 3 High Tax Rate and Unequal Distribution of Tax Burden A prime determinant of gambling revenues is the take-out rate, which is the fraction of the total bet retained by the state. The implicit tax rates on commercial games of pure chance vary depending on the take-out rates. If it can be assumed that expenditures on gambling are highly concentrated, then the associated tax burden is expected to be unequally distributed, as the distribution of the tax burden will be concentrated as well. While designing the gaming taxes, states would need to be mindful of any disparities between gaming and other sin tax rates. On equity grounds, all sinful activities with alleged negative social externalities, drinking, smoking, and gambling, should be treated equally. Regressivity Unfortunately, there are very little data on the demographics of casino players in general and those in New Jersey in particular. According to a recent survey by Harrah s Entertainment Inc. (1996), in comparison to the average American, casino players tend to have higher levels of income and education and are more likely to hold white-collar jobs. This is most likely for traditional destination playing, which often requires travel and overnight stays, more affordable by affluent players. However, an examination of local players at low-stake facilities, including slot machines, is more likely to reflect a regressive distribution. It appears that most forms of gambling attract betting by lowincome people in greater proportion to income than by high-income people and, hence, represent a highly regressive source of revenue. As casino gambling becomes more widespread and easily accessible, it will become increasingly regressive. However, given that the potential yield of casino revenues is small in proportion to total revenue, they would produce only a minor alteration of the progressivity of the total state and local revenue structure. 13 Non-Neutrality When winnings from different gaming activities are taxed differently, as is the case in New Jersey where lottery winnings are exempt, tax neutrality is violated. Lotteries compete with horse racing and other games of chance played at casinos. To the extent this structure of gambling taxes interferes with the gambler s decision making and the allocation of the so-called finitegambling-dollar, tax neutrality would be distorted. In part because of the disparate involvement of the state across the gambling industry, ranging from state provision (lottery) to state control (casino), gambling decisions are likely to be tampered with. Any interference would violate the neutrality criterion. Uncertain Future The future potential of gaming revenues is somewhat uncertain. Game portfolios significantly affect sale and consequently revenues to the state. The casino industry in New Jersey has been introducing new games such as Keno to attract players. However, competition among different forms of gambling may limit efforts to promote any one form. The decline in pari-mutuel revenues in general is blamed on lotteries and casinos. In some states, casinos are also reported as cannibalizing lottery and other state and local revenues. 14 The 408
BETTING ON CASINO REVENUES substitution potential between different forms of gaming activities tends to increase the advertising and operational costs associated particularly with state lotteries. Interstate Competition As more states, particularly neighboring states, legalize casino gaming, the future of Atlantic City will become more uncertain. The case of Illinois is illustrative. For instance, revenues and admissions declined markedly in 1995 in two riverboat casinos, which felt the direct negative impact of nearby out-of-state gaming competition along the Mississippi river. The unsuccessful experiment with the New Orleans casino provides yet another example of the uncertain future of casino revenues. Earmarking All casino revenues are earmarked in New Jersey. Over $330 million were appropriated from the casino revenue fund, in FY1995, to benefit eligible senior and disabled citizens in New Jersey. Pharmaceutical Assistance to the Elderly and Disabled was the largest program accounting for the bulk of appropriations in FY1995 (see Chart 1). Most states earmark gaming revenues to increase the political appeal and win public approval. However, some of the newer casino states appear to be earmarking a lower percentage of their casino revenues. For instance, in Colorado, only two-fifths of the casino revenues were for dedicated use. Iowa is an interesting example with a very small percentage earmarked, the remaining going into the state general fund. The downside of earmarking is the rigidity it introduces in the budgetary process. Any deficit in such funding tends to threaten the continuity in socially desirable programs while, unused year-end balances cause suboptimal use of earmarked funds. During several budget years, New Jersey has experienced substantial year-end unused balances in earmarked funds. Proper cost projections and program design are necessary to avoid this problem. Exportability A segmented casino industry market has helped New Jersey casinos enjoy a large chunk of casino patrons, particularly from the Northeastern states. The large out-of-state patron base has enabled New Jersey to export some of its casino tax burden to other states. In Louisiana, riverboat casinos, in the Lake Charles and Shreveport/Bossier areas, are also attempting to attract the Texas population. The size of gains from the casino option will depend to a large extent on the potential to attract tourists, particularly from out of state. However, as more neighboring states adopt the casino option, there will be limits to exportability. Social Costs One of the most serious issues raised under the casino option relates to social costs. Compulsive gambling and crime potentials are believed to be associated with gambling activities. However, conflicting results are reported in studies on casinos and crime. Atlantic City is reported to have experienced an increase in crime after the casinos were legalized. However, according to a more recent study, crime rates, adjusted for tourists, were higher in several cities in Florida, which does not have casino gaming. 15 There appears to be some disagreement on whether the increased availability of gambling increases the 409
NATIONAL TAX JOURNAL VOL. XLIX NO. 3 number of problem gamblers. 16 However, there is also the fear of increase in induced gambling as states enter into the provision and promotion of gaming activities to meet their revenue needs. Another social cost to bear in mind is the potential threat of money laundering as the casino fever continues to spread rapidly. 17 There are other costs imposed by casinos on state and local governments, such as those related to infrastructure and law enforcement. For instance, the future of the proposed $750 million Mirage casino-hotel and other major gaming attractions hinges on New Jersey s commitment to pay for the tunnel project which would connect the Expressway and the new Convention Center to the proposed resort site. 18 Any disruption to the local economy would also increase the cost of the casino option. 19 LESSONS FOR OTHER STATES There are lessons to be learned from the casino experiences of Nevada and New Jersey, the two major land-based casino states, and the relatively new riverboat casino states. Nevada s case illustrates that casinos have played a major role in developing tourism which is the prime mover of the Nevada economy. However, the gaming industry is playing a lesser role now with the advent of diversification of the Nevada economy. Lessons from the New Jersey experience are probably more relevant to other states that are considering the casino option. This is because New Jersey has restricted casino gaming; statewide casino gaming, an unlikely scenario elsewhere, makes Nevada unique. Thus, only small-scale casino gaming as in Atlantic City is likely to be introduced in other states. This trend is reflected in recent legislative bills passed by states. Another factor that makes the New Jersey case more interesting is that casinos were legalized after the introduction of lotteries. Most states that are considering the casino option also have lotteries, and they have the New Jersey experience to learn from. 20 Nevada is not yet a lottery state. In the 18 years since their legalization, casinos have had a significant economic impact in New Jersey, particularly in Atlantic County. However, given the existing infrastructural and environmental constraints, including the lack of modern air travel facilities, a poor city environment, and the absence of major nongaming tourist attractions, Atlantic City is far from being revitalized into a major tourist destination resort. The original goal of revitalizing the city has not yet been accomplished. Recently, efforts have been made to plough back some of the casino revenues into Atlantic City to support its much needed redevelopment. The upcoming Convention Center and the Corridor projects are examples. Several existing casino hotels have launched major renovation and expansion projects. According to the 1995 CRDA report, there are 3,470 new hotel rooms in approved expansion projects, with a total construction cost of $494 million. A greater public-private coordination would strengthen tourism in the City. Casinos are no magic wands. 21 The City needs diversification, development of nongaming tourist attractions, and improved amenities in order to be revitalized. However, with the recent changes in casino regulations and good industry results, there is a lot of new interest, and Atlantic City appears to be all set for a major economic liftoff. 410
BETTING ON CASINO REVENUES Conclusions The casino fever is likely to continue because it promises jobs and revenue and because of the growing popular interest in recreational gambling. Even economists would agree, ignoring pesky issues of social costs, that the bundling of legalization and taxation does indeed lead to a net improvement in social wellbeing, since consumers voluntarily consume a service that did not previously exist. 22 There is no doubt that social acceptance of gambling has increased and gaming is more institutionalized today. 23 The policymakers have to decide on the tough question of how much the state should rely on gambling to provide state revenues? Currently, as noted earlier, gaming revenues in general and casino revenues in particular contribute a small and unstable fraction of state general revenues. In recent years, the share of casino revenues is actually declining in Nevada. Even though casino taxes are an attractive source in that the burden is easily exported, this potential will get weaker if more states legalize casinos. Competition among different forms of gambling may limit efforts to promote any one form. Regulatory costs would rise with the introduction of more casinos. Unlimited license environment, as in Mississippi, may decline returns to the state. Gambling is not a fiscal panacea, and it would be foolish to expect it to provide much in the way of budgetary relief. 24 Regressivity associated with gaming activities is another important policy concern. The success of introducing casino gaming as an economic development and fiscal tool in any state also hinges on a well-coordinated development plan, involving the state and the private sector, and requires the provision of nongaming tourist attractions as well. While considering the casino option, states must also weigh the prospective gains against social costs, such as the increase in compulsive and juvenile gambling and crimes associated with gambling in general. Above all, and regardless of the motivation behind the legalization of casino gaming by states, the first objective should be to keep the integrity of the casino industry intact. In the meantime, while state and local governments are busy exploring the casino option, more efforts need to be directed toward evaluating reliable answers about the true costs and benefits of casino gambling. The proposed National Gambling Impact and Policy Commission would be a good starting place to launch an indepth study of this kind. More research also needs to be directed specifically at the state and local levels. The potential for gaming in cyberspace will also raise newer policy concerns in the future. ENDNOTES The views expressed are those of the author and do not necessarily represent the views of the Division of Taxation or the Department of Treasury. The author would like to thank Robert Tannenwald for helpful comments. 1 See Christiansen/Cummings Associates, Inc. (August, 1995). Most of the industry statistics are based on this source. See also International Gaming & Wagering Business (July, 1995). 2 Foxwoods in Connecticut, which is operated by the Mashentucket Pequot Indian tribe, provides the most successful example of Indian gaming in the United States. 3 See GAO Report (January, 1996) for details. 4 For a comparison of casino gaming in New Jersey and Nevada, refer to Madhusudhan (1989). 5 See editorial section in the Wall Street Journal, May 10, 1996. 6 The industry statistics were obtained from the Casino Control Commission, The Casino Reinvestment Development Authority, the Casino Association of New Jersey, and the New Jersey Office of Management and Budget. 411
NATIONAL TAX JOURNAL VOL. XLIX NO. 3 7 The new casino was renovated by Donald Trump as part of the Trump Plaza expansion project. 8 New Jersey Department of Travel and Tourism. 9 Casino revenues are from the eight percent gross revenue tax. 10 The first $600,000 in any fines assessed per year are to be used for programs on problem gambling. Any excess over this amount is to be directed to the CRF. 11 This section is an update and expansion of a background report, New Jersey Gaming Revenues: Issues and Options (January, 1988) prepared for the New Jersey State Revenue and Expenditure Policy Commission and a more recent report by Madhusudhan in the FRB Boston Proceedings, 1995. 12 From Illinois Gaming Board Annual Report, 1995. 13 See Suits (1977). 14 See the case of Illinois in State Tax Notes, February 14, 1994. 15 The Kleindienst (1994) Florida study was mentioned in the February, 1995 issue of the NCSL Legislative Brief. 16 According to a 1993 Gallup survey, approximately five percent may be categorized as problem gamblers in New Jersey. 17 In a recent report, the GAO examines the potential for money laundering and recommends several measures to deter and check such undesirable trends. 18 Refer to The Times, April 29, 1996, for details on proposed expansion plans in Atlantic City. 19 See Sternlib and Hughes (1983) for a report on Atlantic City. 20 Mississippi, which has legalized riverboat casinos, is an interesting exception. 21 See Gold (1995). 22 See Clotfelter (1995). 23 As reported in USA Today (May 20, 1996), the gaming industry is hunting for the next-generation slot machine games using some of America s brightest and highly trained persons. 24 See Suits (1977). REFERENCES 12 Plus 1 Equals 12 in Trump Math. The Times, Atlantic City (April 29, 1996): C2. Christiansen/Cummings Associates Inc. Gross Annual Wager of the United States. International Gaming & Wagering Business 16 No. 8 (August, 1995): 29 68. Clotfelter, Charles T. The Promise of Public Revenue from Casinos. In Casino Development: How Would Casinos Affect New England s Economy?, edited by Robert Tannenwald. Boston: Federal Reserve Bank of Boston, 1995. Colorado Division of Gaming. Gaming in Colorado, Fact Book & 1995 Abstract. DRP 9566 (11/95), Denver, Colorado, 1996. Gambling in America. The Wall Street Journal, editorial (May 10, 1996): A10. Giertz, J. Fred, and Therese J. McGuire. Lottery Sales Down by $71 Million. State Tax Notes 6 No. 7 (February, 1994): 396. Gold, Steven D. Casinos Are No Panacea for Ailing State Budgets. In Casino Development: How Would Casinos Affect New England s Economy? Boston: Federal Reserve Bank of Boston, 1995. Harrah s Entertainment Inc. Harrah s Survey of Casino Entertainment: 1996. Memphis: Harrah s Entertainment Inc., 1996. Illinois Gaming Board. 1995 Annual Report. Springfield, IL: State of Illinois, 1996. International Gaming & Wagering Business. North American Gaming Report 1995. New York: BMT Communications, Inc., July 1, 1995. Kleindienst, Linda. Reports Conflict on Whether Casinos Will Increase Crime. Fort Lauderdale Sun-Sentinel (September 27, 1994). Madhusudhan, Ranjana G. Gambling Fever in America and the Implications for State and Local Finances. In Proceedings of the Eighty- Second Annual Conference on Taxation. Altanta: National Tax Association Tax Institute of America, 1989. Madhusudhan, Ranjana G. Implications of Legalized Gambling for State and Local Finances: The Case of New Jersey. In Casino Development: How Would Casinos Affect New England s Economy? Boston: Federal Reserve Bank of Boston, 1995. National Council of State Legislature. Legislative Brief 3 No. 6 (February, 1995). (The NCSL also provided data on the phone.) New Jersey State and Local Expenditure and Revenue Policy Commission. New Jersey Gaming Revenues: Issues and Options. Background report prepared by Ranjana G. Madhusudhan, Trenton, January, 1988. Sternlib, George, and James Hughes. The Atlantic City Gamble. Cambridge, MA: The Harvard University Press, 1983. Suits, Daniel B. Gambling Taxes: Regressivity and Revenue Potential. National Tax Journal 30 No. 1 (March, 1977): 19 35. U.S. General Accounting Office. Money Laundering: Rapid Growth of Casinos Makes Them Vulnerable. GAO/GGD-96-28, Washington, D.C., January, 1996. 412