NC leaders are still gambling with North Carolina’s future

North Carolinians want a final budget that prioritizes the well-being of their children, parents and neighbors and forges a pathway to a better future by putting our collective wealth to work for us all.

In stark contrast, legislative leaders want to authorize casinos in North Carolina and, particularly, in their home counties.

So much so that they appear willing to forgo the passage of a final budget that would ensure public schools don’t lose even more ground in providing the sound, basic education that every child is owed; a final budget that would provide thousands with an affordable health care option; and a final budget that would raise the pay of public workers whose wages aren’t keeping up with rising prices.

This latest gamble is troubling but not new.

Legislative leaders have long been betting on bad policies.

It started with the march to zero income tax that began more than a decade ago and has failed to deliver promised employment growth or improved economic conditions that matter to the everyday lives of people from Waynesville to Wilson.

Casino revenue is not an adequate replacement for revenue loss from tax cuts

Now it appears that legislative leaders’ plan for tax cuts relies on the claim that scant gambling revenue should justify deeper income tax cuts for the richest North Carolinians.

The evidence is clear that gambling will not provide an adequate revenue replacement for personal income taxes. Income taxes are the state’s primary source of public funds and the best source for ensuring long-run capacity to keep up with a growing state and ensure that the wealthy pay what they owe.  On top of a decade of personal income tax cuts further reductions will weaken a key leg in the three-legged stool of core revenue sources that is already wobbly with the scheduled elimination of the corporate income tax by 2030.

Comparing the industry-supported report from Spectrum Gaming Group on estimated state revenue from three casinos operating in NC¹Spectrum Gaming Group estimated revenue to North Carolina from taxing gross gaming revenue from casinos at 20 percent at $336 million. The tax rate is slightly higher than the rate that will be applied to sports betting operators as a result of House Bill 347. Even at the highest end estimates when gross gaming revenues would be taxed at 35 percent, the revenue to the state would replace just 8 percent of the public funds lost under proposed personal income tax rate reduction when in full effect. to  the losses from the Senate’s proposed income tax rate reduction to 2.499%, shows that this is a net negative for North Carolina. If taxed at 20%, casino revenue replaces just 5 percent, or $336 million, of the public funds lost to the state from proposed personal income rate reductions when those are in full effect.

Casino revenue also takes time to arrive — casinos have to be built, advertising has to bring people through the doors — and no immediate boost should be expected in the near-term even as NC Senate leaders are in a rush to reduce income tax rates as soon as possible for the wealthy and profitable corporations.  It is therefore possible that current plans would have income tax rates reduced before realizing any revenue from gambling.

Gambling revenue is unpredictable, may mean decrease in sales tax revenue

As has been documented in other states, over time, revenue collections will slow as states compete for those willing to travel to gamble and have to deal with the cyclical nature of this revenue source. That will leave North Carolina reliant on the limited dollars of residents, primarily those with middle and low incomes and those with compulsive gambling addictions.

The promised revenue for state and local governments won’t just be modest and unpredictable, it is also not necessarily new dollars.  As the Institute on Taxation and Economic Policy points out:

“When consumers spend more money on gambling activities, they will spend less money on other items, such as recreation and even basic needs. Since these other types of purchases are usually subject to state sales taxes, any increase in state gambling revenue usually means a decrease in state sales tax revenue.”

Casinos do not improve standards of living for people in the community

As an economic development strategy, casino expansion fails a basic test of improving the standards of living of people in the community. As researchers at the Federal Reserve Bank of St. Louis point out, a casino does not necessarily lead to better employment outcomes for residents of the community.  More often than not, jobs in gaming that pay living wages are out of state or out of the communities where casinos are located.  The jobs in gaming services pay a median salary of $31,000, just slightly above the poverty threshold for a family of four and well below the Living Income Standard for the state.

But it’s not just employment promises that are unlikely to materialize, the broader economic benefits are unlikely to stay in the community, or even in the state, as multi-state operators send profits to out-of-state shareholders.

What remains for NC would be a range of increased social and economic costs that stem from problem gambling and an industry business model that depends on predatory practices and advertising and has had a demonstrated corrupting influence on the policymaking process

State leaders need to build a budget that works for everyone in NC

Life has gotten harder for North Carolinians over the past decade.  Legislative leaders have demonstrated little will to act against the powerful forces that are making that so, squandering the great potential in our state to use our state budget to make lives better in the everyday ways that count.  Making child care accessible and affordable, providing certainty about pay for state workers, ensuring public institutions can operate in extreme heat, and connecting people to the health care that saves lives and prevents illness are all tied up in the choices legislators make about what to fund and who will benefit.

The reality with casinos and the state budget is that legislative leaders have continued to legislate in isolation and from behind closed doors — without the input of the people or the insight of their experiences, without transparency, and without a care for the evidence that their choices bring big risks for the future of our state.

Communities slated for these casinos are already taking steps to ensure that they have a say in whether this industry is pushed into their community by legislative leaders. Nash County leaders have passed a resolution calling on state leaders to give the people an opportunity to vote to approve the location of a casino in their towns.

The people of North Carolina deserve leaders who work through the difficult process of putting together a budget that works for all of the people they are elected to serve, not just corporate interests.  Together we can demand that our budget is finalized not with games and gimmicks, or with giveaways and gambles, but with the solid commitment that our state will deliver the quality schools, affordable healthcare, and good-paying jobs that ensure all of our families can thrive.​

Footnotes

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  Spectrum Gaming Group estimated revenue to North Carolina from taxing gross gaming revenue from casinos at 20 percent at $336 million. The tax rate is slightly higher than the rate that will be applied to sports betting operators as a result of House Bill 347. Even at the highest end estimates when gross gaming revenues would be taxed at 35 percent, the revenue to the state would replace just 8 percent of the public funds lost under proposed personal income tax rate reduction when in full effect.