Economic Effects of Lottery Gambling

While casinos have been an extraordinary economic success story for a handful of Indian tribes, 51 for most they have brought considerably fewer benefits. Wayne Taylor, chairman of the Hopi tribe, testified, “With the exception of a very few, very small and very fortunate tribes … who have had extraordinary success with tribal gambling, the majority of tribes across the country still find it very difficult to reconcile the obligation and responsibilities side of their ledger with the income side.” 52 As of the writing of this report, the unemployment rate among Native Americans continues to hover around 50 percent. 53

Other Gambling Industries
Other segments of gambling have a significant economic impact upon places and people, but the benefits do not include large-scale growth or employment. Most lottery directors testified that the impact of lottery revenue was beneficial to the state and its citizens, but, in the cases where revenue distribution was specified, no state could prove that program funding would not exist in the absence of lotteries. To the contrary, several states experienced reductions in actual general funding for programs for which lottery revenue was earmarked. Nor are the economic implications of regressive taxation given much consideration. As Dr. Philip Cook, a leading researcher under contract to the Commission, stated, “It’s astonishingly regressive. The tax that is built into lottery is the most regressive tax we know.” 54 In addition, the inordinate number of lottery outlets in poor neighborhoods and the reliance upon a small number of less-educated and poor individuals for the bulk of the proceeds causes us serious concern. In fact, Cook and his colleague, Dr. Charles Clotfelter, found that lottery players with incomes below $10,000 spend more than any other income group, an estimated $597 per year. Further, high school dropouts spend four times as much as college graduates. Blacks spend five times as much as whites. In addition, the lotteries rely on a small group of heavy players who are disproportionately poor, black, and have failed to complete a high school education. The top 5 percent of lottery players (who spend $3,870 or more) account for 51 percent of total lottery sales. Several government officials suggested that a state’s only alternative to a lottery was a tax increase. Limiting spending, reducing the size of government, or seeking alternative revenue sources were rarely mentioned.

No economic benefit to either a place or a person was advanced by proponents of convenience gambling. There are no national statistics that indicate the specific impacts of neighborhood gambling and there are few significant state-wide studies.

We did hear compelling testimony indicating that neighborhood gambling is a phenomenon that should be more widely studied, and therefore should be a serious topic of inquiry in this Final Report. Las Vegas Mayor Jan Jones said that, in her view, neighborhood gambling locations are places where children and families routinely visit. She spoke of entering a grocery store and seeing parents playing slot machines with children sitting behind them. Children see gambling as part of the same environment as candy and soda. Such encounters with gambling may lead to higher rates of adolescent gambling and problem/ pathological gambling in later life. Such availability also harms economic diversification, because some corporations from both inside and outside the state may object to relocation to an environment that allows neighborhood gambling. And sadly, convenience gambling is often found in neighborhoods where the money spent on gambling could otherwise be spent on necessary goods and services. 55

50 Ibid. 51 According to the 1997 NIGC Audit Reports, the 8 largest operations account for more than 40 percent of the more than $6 billion in gross revenues, 20 operations account for 50 percent of the total, and 45 operations account for 71 percent of revenues. 52 Wayne Taylor, testimony before the National Gambling Impact Study Commission (July 30, 1998), Tempe, AZ. 53 Liz Hill, “Senate Oversight Hearing Addresses Welfare Reform and Indian Country,” Indian Country Today (April 26, 1999). 54 Dr. Philip Cook, Meeting of the National Gambling Impact Study Commission (March 19, 1999).