Gambling Doesn’t Fix the Budget

Another reason that gambling has failed to close states’ deficits is that it doesn’t capture money for the government that otherwise would be spent on untaxed illegal betting, as supporters claim. A 2002 National Bureau of Economic Research study of 21 states by economist Melissa Schettini Kearney found that, in the first year after a state instituted a lottery, consumer spending on other purchases fell by about $42 per month per household—nearly as much as was being wagered on the new lotteries. After California’s lottery was introduced, the state’s grocers’ association reported a 7 percent decline in sales. One northern California retailer, Holiday Quality Foods, announced that it would stop selling lottery tickets because its profits had fallen 10 percent after starting to offer them.

Does gambling revenue do much to help states balance their budget? According to the City Journal, the answer is no for a variety of reasons—including the idea that people who spend $5 on lottery tickets are just spending $5 less on other things, like groceries. I’ve been to the Belmont Park Race Track and have seen it look pretty sad and empty. Same goes for Atlantic City on a weeknight, though I’d bet (“bet”) that it’s much busier on weekends, or when Adele or Phish or whatever popular musical act comes to play. But, I do like to buy lottery tickets when the number gets to be some ridiculous amount, because sometimes it’s nice to dream.


5 Comments / Post A Comment

jfruh (#161)

We’ve now hit a point though where the question is not “will people spend new taxable money on gambling or divert spending from other taxable things,” but rather “will people divert gambling spending from state A to state B.” Here in Maryland one of the big drives behind expanding gambling is its ready availability in Delaware, Pennsylvania, and West Virginia, with the thinking being, why not us?

OhMarie (#299)

@jfruh Yes, bam. Practically all of the anti-gambling ads are being paid for by the people who run the PA and WV casinos.

I’m oddly conflicted about question 7, though. I wish it was just table games–I am all for that. There are just too many other things going on in there.

Fig. 1 (#632)

Not to pick on you for two consecutive days, but… BREAKING: MIKE DANG BUYS LOTTERY TICKETS

Mike Dang (#2)

@Fig. 1 Just twice! Or maybe three times max in my entire life! Only when the payout is something outrageous like one billion dollars.

Fig. 1 (#632)

@Mike Dang Ok, I’ll give you that one, but only because you have to crack somewhere.

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