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    Added on 29 October 2021

    Assessing the Economic Impact of Gambling

    29 October 2021

    The global gambling industry is estimated to be worth more than $500 billion in 2021. It experienced significant growth in the last 20 years, and more than 1.8 million people work in the sector in the US alone. The industry has managed to weather the economic impact of the COVID-19 pandemic without losses as its customers switched to online casinos.

    Just like the tobacco and alcohol industry, the gambling industry isn’t free from controversy, as gambling is known to be addictive, and irresponsible gambling can have a wide range of negative consequences for both individuals and societies. On the other hand, it’s hard to overlook the benefits that the regulated gambling industry can have through taxes, jobs, and the development of tourism. Countries that have legalized gambling often impose high tax rates on gambling establishments and moderate ones on player winnings, and gambling income is often a significant item in their budgets.

    Tax revenue

    Countries with legalized gambling can count on a significant boost to their budget with taxes the industry is subject to. In the US, states like Pennsylvania, Nevada, and Maryland have the highest tax revenue from gambling. Taxation of casinos in Pennsylvania brought more than $1.1 billion in 2020 to the state budget, almost double compared to Nevada.

    Depending on the local legislature, gambling establishments have to pay a percentage of their gross gaming revenue, which is the money they’ve earned from wagers, minus the winnings paid out to players.

    One of the countries with the highest GGR tax rate is France, where land-based casinos have to pay up to 83.5% of their GGR in the form of tax. In the US, the rate varies by state, with Rhode Island having the highest tax rates at 51%. Pennsylvania’s tax rate is 34%.

    Income from gambling is typically used to fund public programs and services. Most often, this includes various educational and economic initiatives. It goes without saying that a portion of the funds is also used to treat gambling addiction and help individuals at risk from it.

    Jobs and gambling tourism

    The gambling industry opens plenty of job opportunities to those interested in working at casinos, sportsbooks, and other gambling venues. Furthermore, land-based casinos often expand their operations to offer hospitality services, as casinos incorporate hotels and restaurants in their infrastructure.

    The gambling industry also creates jobs in various sectors besides hospitality. There are numerous high- and low-skill positions, and people can find employment as managers, supervisors, accountants, security personnel, and software developers.

    The casino industry and gambling establishments are also beneficial for other local businesses because they attract tourists. Many gambling destinations are at the same time some of the most popular tourist attractions, as seen from Nevada’s sixth consecutive month in 2021 that surpassed $1 billion in monthly gambling revenue.

    Las Vegas may be the world’s capital of gambling, but other famous gambling locations, such as Macao and Monte Carlo, also attract millions of tourists, bringing significant amounts of money to local governments’ budgets.

    The list of positive externalities goes on, as gambling establishments can also provide recreational opportunities and even increase property values.

    The economic burden of problem gambling

    While the positive effects of substantial cash influx from taxes and tourists are obvious, especially when that money is invested in public infrastructure, education, and other beneficial programs, gambling addiction is a problem that requires to be addressed. A not-so-negligible percentage of gambling enthusiasts will develop gambling addiction and will need assistance and guidance in protecting their assets.

    While most gamblers don’t exceed their allocated budget for their gambling activities, cases where people (and their families) end up neck-deep in gambling debt are far from a rarity. It’s up to governments to establish mechanisms that promote responsible gambling and to force gambling operators to adhere to strict rules and contribute to solving the problem they have caused.

    It’s harder to quantify the detrimental effect of gambling on individuals and society as a whole than the economic benefit to the community. A person who struggles to control their gambling is likely to be a less productive member of the society, often suffers from accompanying mental health issues such as depression and anxiety, is a negative role model for their children, and usually requires professional help to recover from addiction. That’s why many states use a share of the tax revenue to fund government-sponsored programs like Gamblers Anonymous to tackle the issue. Still, as negative effects are many-fold and complex, calculating the exact costs of problem gambling in any state or country is a Herculean task.

    A two-edged sword

    The most beneficial economic impact of regulated gambling can be seen in tourist destinations that attract a high volume of leisure gamblers. However, such a gambling-based economy has its downsides, as the COVID-19 pandemic vividly demonstrated.

    Macao, a popular gambling destination in Asia, had its gross gaming revenue plunge almost 80% due to pandemic-related restrictions. With much of the profits depending on land-based establishments, not diversifying state budget income sources can be very costly during a global crisis such as this one.

    While it’s hard to foresee such occurrences, it’s clear that each industry must be flexible and adjust. On the whole, however, the gambling industry has demonstrated enviable flexibility as it grew in 2020 and continues to grow in 2021, primarily thanks to its online offer. That’s why regulating online establishments is no less crucial for governments than regulating brick-and-mortar casinos and sportsbooks.

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