Online Gambling, a Multibillion Dollar Tax Windfall

By many estimates, New Jersey's new law that allows online gambling will help troubled Atlantic City. It also will bring the state as much as $30 million a year. That does not seem like much, but if another dozen or two dozen states approve similar measures, the number could move toward $500 million nationwide, which is not an insignificant number given the revenue challenges that the recession and a drop in federal funding based on new cuts will mean. Online gambling could help salvage efforts to cut at least some of the states' deficits.

While a very large windfall from online gambling may not materialize in the next year, an older source of "gambling" income has been a large benefit to states. Since New Hampshire approved the first state lottery in 1964, 44 states have made similar moves. Cross-border lotteries have made the business even more lucrative for states. Indian casinos have become another source of revenue because they have created jobs and built up the cities in which those casinos exist.

While the New Jersey online gambling law does not have a cross-state component, with full cooperation from other states like Nevada, the gambling capital of the United States, there is certainly a chance for that. Online gambling could become the latest state-approved sin to bring in tax revenue.

Some state legislators object to gambling completely. It would be well for them to consider how much money taxes on the sales of cigarettes and alcohol bring.

Bad behavior cannot be eliminated, so the states might as well embrace it as a source of funds. In a period in which state revenue could slip back to 2009 levels, as well as wreck any advances states have made toward closing budget gaps, it may be the only game in town.

Filed under: 24/7 Wall St. Wire, Economy Tagged: featured