Another state, another crisis, another half-baked plan to plug a budget gap without cutting any spending. Legalizing online gambling in Pennsylvania, while certainly an improvement over outlawing it entirely, won’t significantly increase Pennsylvania’s state revenues overall, nor will it hurt or much help the firms currently operating casinos in the state like Penn National Gaming, Pinnacle Entertainment, or Las Vegas Sands. Sheldon Adelson’s aversion to online gambling notwithstanding, perhaps this is an opportunity for him to see that it’s not a threat to his business.

First, spending a day or weekend to have fun at a casino is very different from spending a few minutes or hours on your phone playing poker or slots on your daily commute. Though the two markets certainly overlap somewhat, it’s not like legalized online betting will thin out the casino crowds noticeably. The two activities are qualitatively different consumer experiences and won’t cannibalize all that much.

Second, remember when Chris Christie infamously predicted $180 million a year from a 15% internet gambling tax, but only ended up with $12 million? Something similar will happen in Pennsylvania. There will be a marginal increase in tax revenue but it will be much smaller than the politicians are expecting. The reason will be the same for why this happened in New Jersey. iGaming is not a productive industry. It doesn’t produce wealth. It only produces entertainment by consuming wealth. That’s fine, but that doesn’t increase tax revenue on net, at least not by much. Gaming is a consumer service, and therefore only redirects wealth from other industries for entertainment purposes.

The politicians are expecting the new legislation to rake in $200 million annually from license fees and taxes. Even if they do, they’ll lose tax revenue elsewhere as individuals balance their budgets so the net increase will be much smaller.