Analysis

Alabama’s potential gaming tax boost

The legalization of various forms of gaming in Alabama would provide the state with a substantial tax revenue boost according to a study group report.

A study group review order by Alabama Gov. Kay Ivey at the start of this year has concluded that gambling expansion could generate up to $710m to the state’s coffers.

The Study Group on Gambling was formed with the intention of looking into the impact of expanded gambling in Alabama.

Alabama is something of a desert when it comes to gambling options. As it stands, it has some pari-mutuel horseracing and limited licensed charity bingo.

It is unsurprisingly one of the lowliest states on the Wedge Index of gaming friendliness in 40th position. Any moves to widen gaming in the state would help it climb up the index.

Cost-benefits

The Study looked into whether lottery, casino gaming (including tribal gaming) and sports betting should be legalized.

It came up with a list of arguments in favour. These included the entertainment value of having gaming in the state and the economic benefits in terms of job creation.

But ultimately, the argument is likely to come down to the tax benefits to the state. The report estimated that a licensed lottery could bring in as much as $300m, casino gaming would bring in up to $400m and sports betting a mere $10m.

This last figure would likely be an underestimate depending on how sports betting was licensed.

Among the extra costs to be considered are extra expense on treatment and education around problem gambling.

But report author Todd Strange, the chair of the study group, said “an effective system of gambling will maximize benefits realized by a state.” It would also minimize the costs.

Strange noted that given Alabama was one of the very few states yet to have instituted a state lottery. As such, it would have all the lessons from previous experience laid out before it.

He said that best practice dictated that a regulatory entity would need to be established.

The way ahead

The group concluded the state has a unique opportunity to address gambling as a “matter of public policy.”

“This opportunity can be considered as a variety of options that range from maintaining the status quo to authorizing, regulating, and taxing gambling within the state.”

Each option would require varying levels of government action. “But meaningful change to Alabama’s gambling policy will likely require action by the Legislature and the Governor and a vote of the people of Alabama to amend the state constitution.”

The report noted that any changes would need a referendum. It said that in total 180 bills have been proposed in the legislative but none have to date succeeded.

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Scott Longley

Scott Longley has been a journalist since the early noughties covering personal finance, sport and the gambling industry. He has worked for a number of publications including Investor's Week, Bloomberg Money, Football First, EGR and GamblingCompliance.com. He now writes for online and print titles across a wide range of sectors.

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