Extras on Excise: Is Gambling the Tax Cash Cow That States Want It to Be?

Long gone are the days when Las Vegas was one of the only legal gambling outlets in the nation.  Most states now allow some form of gambling, from bingo to slots to table games, and a few states are even pushing into the online gambling realm.

But will legalized gambling, online or otherwise, continue to be the tax cash cow that states want it to be?

Indiana’s revenue experience might be instructive. According to the Casino Association of Indiana, Indiana’s casino industry has brought in $10 billion in wagering taxes and $1.5 billion in admission taxes to the state since 1996 through December 2013. But in 2012 and 2013, Indiana faced new competition as several casinos opened next door in Ohio. 

An Associated Press story reported this week that Indiana saw a $50 million drop in casino revenue since June when compared to a year earlier, and that’s about $5 million more than state officials estimated. A lagging economy could partly be to blame, but the opening of a new casino in downtown Cincinnati last March might be hitting Indiana particularly hard, since three Indiana casinos are within about an hour’s drive of Cincinnati. 

Now, with online gambling on the rise, will revenue continue to grow? Gambling advocates think so.

As Bloomberg BNA reports this Friday in its 2014 State Tax Outlook story, three states – Nevada, New Jersey and Delaware – are offering legalized, licensed and taxed Internet gambling within their borders. More states are considering jumping on the bandwagon, and will closely watch how the trailblazers regulate and tax their online gambling transactions. 

But even with the increased revenue states anticipate from online gambling, could the accessibility of the online marketplace cut into the business of brick-and-mortar casinos?  New Jersey plans to tax online gambling at a higher tax rate than gambling that takes place in person at brick-and-mortar casinos, but both Nevada and Delaware tax gambling at the same rate regardless of whether the taxpayer gambles in person or online. 

Continue the discussion on Bloomberg BNA’s State Tax LinkedIn page: At what point will gambling tax revenue peak?

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