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Legalization of Casino Gaming

To start with, increasing productivity in the manufacturing sector and industrialization of third-world countries make competition for manufacturing jobs keen.

For example, Alabama recently granted approximately $200 million in tax abatements and other incentives to encourage Mercedes-Benz to locate 1,700 manufacturing jobs in that state.

Jobs and disposable income are flowing out of the manufacturing sector. Thus, states are finding their traditional sources of revenue based on a manufacturing economy under attack, and state budgets are feeling the pinch of flat or declining revenue.

The legalization of various forms of gambling is an opportunity to capitalize on those ends.

Now, when gaming is legalized in a particular jurisdiction, $200 million in incentives do not go along with it. Instead, gaming companies are expected to pay as much as 20 percent of their gross revenue in taxes.

This is clearly a tax on leisure services that is unpopular in other forms of services. Additionally, a single casino can provide 700-1,500 jobs--- jobs that are specific to that area and no directly in danger to export to other areas.

Once the legalization of casino-style gaming has started, domino effect takes hold as more states realize the the implications of the shift to a service economy, and move to defend their jobs and broaden their tax base.

For example, shortly after Iowa began riverboat gaming operations on the Mississippi River in 1991, Illinois does not, a loss of potential revenue occurs when Illinois residents travel to Iowa.

Unlike Iowa, however, riverboat gambling in Illinois has no betting limits or maximum chip buy-ins. This more liberal approach helps the competitiveness and profitability of operators there versus those in more restricted gaming venues.

The contagious desire to share this 'painless tax' from gambling continued with the state of Mississippi bettering the then-existing competition, allowing unlimited licensing and 24-hour dockside gaming as opposed to requiring the riverboats to cruise during the gaming sessions.

This exemption translates into a tremendous cost and capital expenditure savings for gaming operators in Mississippi.

Further, it allows for a land-based extension of the vessel, allowing the incorporation of hotels, restaurants, and other amenities into the overall casino development.

Not wishing to be left out, Louisiana has approved casino-style gaming on riverboats and certain forms of land-based gaming as well. Other states looking at legalized casino-style gaming include Texas, Pennsylvania, and Massachusetts.

This domino-effect is also being driven by the growth of gaming on American Indian lands.

A Federal Indian Gaming Regulatory Act, passed in October 1988, provided that native American tribes could conduct any form of gambling without restriction on tribal lands--- if that form of gambling is legal within the state and an agreement, or compact, has been entered into between the state and the tribe.

Subsequent to passage, a series of legal decisions have been returned clarifying aspects and defining its power.

The net effect of these decisions has been to clarify the types of games Native Americans have been allowed to offer and to make casino-style gaming more accessible to a greater segment of the U.S. population.

Because states have no tax authority over operations on tribal lands, the state receives no direct tax revenue from Native American gaming operations.

What follows, then is not much different from a state's concern for its citizens and potential tax revenue being attracted to a legalized gaming jurisdiction in a neighboring state.