The questions of who pays the gambling tax and its impacts upon society are important policy questions. The answer is that the gambler pays the taxes, as the gambler is the source of the tax money – no matter how many hands it is processed through before it reaches a state treasury. When gambling opponents proclaim that we should “tax the casinos” more or that the “casinos must pay their fair share”, false notions are being generated. All taxes come from people, and that is especially the case with gambling taxes. The proper question to ask is, “which people?” For sure they are volunteer gamblers. But are they local residents, or are they tourist visitors who would not otherwise be spending money in the community? More important, are they affluent people who can afford the recreational activity of gambling, or are they poor people who must divert funds from family needs in order to gamble?
Studies of lotteries have suggested that the burden of taxation from sales of tickets falls most heavily upon poorer people. Their purchases of tickets constitute a higher proportion of their income and resources than do purchases of tickets made by more affluent persons. Moreover, many have suggested with empirical studies that governments purposely put lottery ticket sales outlets in poorer residential areas in higher proportion than they do in other neighborhoods. They also direct their advertisement messages toward poorer people. These people are considered their best potential customers in terms of volumes of sales. The National Gambling Impact Study Commission was very critical of lottery advertising. Lottery taxes are considered to be regressive (National Gambling Impact Study Commission 1999, 3–17).
Pari-mutuel racing locations are such that betting on races is not as convenient as buying lottery tickets. Hence, fewer numbers of poor people are attracted to this kind of gambling. Also, the process of selecting probable winners of races is much more difficult than buying a lottery ticket. Nonetheless, many of the regular race-track bettors are poorer people—perhaps because they are regular bettors.
Casino taxes may be regressive or progressive. Casino betting may be convenient, or it may require such major investments of time, energy, and travel money that poorer persons avoid the gambling. For instance, in Las Vegas, taxes on casino gambling can be considered both regressive and progressive. Slot machines are permitted in bars, convenience stores, and grocery stores within walking distance of almost all the residents of Las Vegas. Tourists do not play at these machines. Nor do affluent persons. Many of the bars and 7–11-type stores are established for the primary purpose of offering machine gambling. The grocery stores of Las Vegas stay open twenty-four hours a day in order to service gamblers. A high proportion of the grocery store and 7–11 players are probably problem gamblers. Taxation of the gambling exploits the conditions of these players and must be considered regressive (Thompson 1998, 459–461).
On the other hand, the Las Vegas Strip casinos attract tourists. Over half of the casino visitors arrive in Las Vegas by air. They stay at the hotels for an average of four days, but they gamble only four hours each day. Their gambling dollars are from their recreational budgets. They can afford to gamble; hence, taxes on their activity tend to be progressive taxes (Las Vegas Convention and Visitors Authority 1999).
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