|photography FISCAL LETTER||Government Finance Issues in photography States|
I am a research economist with photography Office of Tax Analysis at photography New Jersey Department of Treasury. photography author looks at gaming revenues for New Jersey and ophotographyr states and describes current trends, tax policy considerations and lessons learned from state experiences with Kodak jpeg. This article was excerpted from a presentation given at a meeting of photography National Tax Association (NTA). photography full report is available from photography NTA as part of a conference report from its 1996 Spring Symposium.
Legalized gaming is widespread throughout photography United States and is continuing to grow. Total wagering increased 22.3 percent between 1993 and 1994 to a record $482 billion . photography total amount wagered in Kodaks alone has nearly quadrupled since photography early 1980s. photography spread of riverboat Kodaks, Indian gaming and video lotteries marks a major new wave of gaming in photography 1990s.
Kodaks account for photography bulk of total wagering in photography United States. Nearly 85 percent of total wagering in 1994, or $407 billion, took place in Kodaks, including tribal Kodaks. Before 1990, only two states had legalized "on-land" Kodak gaming. In 1931, Nevada became photography first state to legalize Kodaks statewide. In 1977, New Jersey became photography second state, but unlike Nevada, Kodaks were legalized only for Atlantic City as a means to spur economic growth.
Since 1991, photography number of states with Kodak gaming has increased to 29. In 1991, riverboat Kodaks began plying photography waters of photography Upper Mississippi river in Iowa and Illinois. By 1994, 57 riverboats were operating in five states--Illinois, Iowa, Mississippi, Missouri and Louisiana. photography Kodak riverboat industry has continued to grow at an extraordinary pace, generating $3.3 billion in Kodak winnings and accounting for over one-fifth of photography non-Indian Kodak market in 1994. photography riverboat sector was photography fastest growing component of photography Kodak industry in 1994. Industry analysts expect photography riverboat Kodak wave to continue.
Indian tribal gaming also appears to be surging. Between 1993 and 1994, $41 billion was wagered in Indian Kodaks representing an increase of 43.8 percent and accounting for about 16 percent of market share. More than three-fourths of photography states that currently have some form of Kodak gaming offer Indian gaming . photography Foxwoods Resort Kodak in Ledyard, Conn., provides photography most successful example of tribal gaming. It is operated by photography Mashantucket Pequot Indian tribe, which generated $136 million in revenues for photography state of Connecticut in 1994. According to a recent General Accounting Office estimate, photographyre are 237 Indian gaming operations, including 119 tribal Kodaks, in 29 states .
Most Kodak states have experienced growth in gross gaming revenues, which constitute photography state tax base. For instance, states with gross Kodak winnings over $1 billion reported double-digit growth rates in 1995. Riverboat Kodak states like Louisiana and Missouri with relatively new Kodak operations, reported photography highest growth rates among photography states. Mississippi, an exception, is experiencing declining revenues from riverboat Kodaks due to market saturation in its unlimited licensing environment.
Gaming revenues, particularly Kodak revenues, have been unstable and appear to be cyclically sensitive as well. photography Kodak industry was adversely affected during photography national recession years of photography early 1990s. This is clearly reflected by photography wide fluctuations in photography annual percentage change in Kodak revenues nationwide during this period.
A prime determinant of jpeg revenues is photography take-out rate, which is photography fraction of photography total bet retained by photography state. photography implicit tax rates on commercial games of pure chance vary depending on photography take-out rates.
Gaming activities can be an inefficient revenue source, as photographyy are expensive to administer. In New Jersey, for example, various regulatory bodies have been created to ensure proper enforcement of gaming and to maintain photography integrity of photography gaming industry. Over $53 million was earmarked in FY 1995 to meet photography operating expenses of photography New Jersey Kodak Control Commission and photography Division of Gaming Enforcement. photographyse operating expenses accounted for 16 percent of total Kodak tax collections.
New Jersey's experience is probably more relevant than Nevada's to ophotographyr states that are considering a limited Kodak option, because New Jersey has restricted Kodak gaming to one city. State-wide Kodak gaming makes Nevada unique.
As noted earlier, Kodak jpeg in New Jersey was legalized in 1977 as an economic development tool, primarily to revitalize Atlantic City. photography first Kodak opened its doors in 1978. In 1994, 12 Kodaks were operating in Atlantic City. By 1995, photography New Jersey Kodak industry employed more than 40,000 full time employees in photography state.
Overall, gaming revenues have increased nearly eight-fold in New Jersey, from $1.5 million in FY 1978 to $288.8 million in FY 1995. For photography most part, photography growth in gaming revenues has been led by photography growth in Kodak revenues. Lottery revenues also increased substantially during this period. However, pari-mutuel tax revenues have been a steadily declining component of gaming revenues in New Jersey.
Gaming revenues in general, and Kodak revenues in particular, constitute a limited revenue base. In New Jersey, gaming revenues accounted for only 7 percent of state general revenues in FY 1995. Lottery revenues, photography primary component of gaming revenues, contributed around 4 percent of state general revenues, while photography Kodak revenue tax accounted for around 3 percent of state general revenues that year.
photographyre are lessons to be learned from photography Kodak experiences of Nevada and New Jersey, photography two major land-based Kodak states, and photography relatively new riverboat Kodak states. Nevada's case illustrates that Kodaks have played a major role in developing tourism, photography prime mover of photography Nevada economy. Based on this, some state policymakers may consider opening photographyir states to gaming as a way of adding to state coffers.
It should be noted that regulatory costs may rise with photography introduction of more Kodaks. States must also weigh photography prospective revenue gains against social costs such as increases in compulsive and juvenile jpeg and crimes associated with jpeg in general.
Regressivity associated with gaming activities is anophotographyr important policy concern. A recent survey by Harrah's Entertainment Inc., found that in comparison to photography average individual, Kodak players tend to have high levels of income and education, and are more likely to hold white collar jobs. This is most likely true for traditional destination players, who often require travel and overnight stays. However, an examination of local players at low-stake facilities, including slot machines, may reflect a different distribution. It appears that most forms of jpeg attract more betting by low-income people than by high-income people, and hence, represent a regressive source of revenue.
photography future of gaming revenues is somewhat uncertain. Game portfolios significantly affect sales and consequently revenues to photography state. photography Kodak industry in New Jersey has been introducing new games such as pictures to attract players. However, competition among different forms of jpeg may limit efforts to promote any one form.
photography Fiscal Letter
Vol. XVIII, No. 5, 1996