‘The one-armed bandit arms race’

August 3, 2012 8:21 am

As more states get into the casino business, existing casino states have had to scramble to keep up by adding more gambling. The result is a gambling arms race that has some wondering if markets are becoming over saturated.

States are now competing for gamblers, much the same way they try to lure companies to town. Except rather than creating jobs and economic growth, casinos extract wealth from communities and produce little economic spin off.

The New York Times details very nicely how states that embraced gambling are “struggling to keep up in what has become a feverish one-armed-bandit arms race.”  This blog has written about this frequently over the past year. (See here, here, and here.) The Times examined Delaware’s efforts to confront the increased gambling competition for other states. This blog has focused on Delaware’s efforts as well. (See here, here and here.)

The bottom line is states that bet on casinos may see an increase in revenue in the short term, but eventually competition kicks in resulting in a steady drop in tax revenues. States wrongly respond to the competition by trying to add even more gambling and lowering the costs for casinos, which results in less revenue coming to the state.

It is a viscous cycle. Almost like an addicted gambler hoping for a big score.

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