What Are the Canaries In the Economic Coalmine to Watch?

global trends: economy: non-traditional revenues

BREATHE DEEPLY

Our last post talked about the adult entertainment industry’s request for a government bailout as a canary in the economy’s coal mine – a harbinger of the thinning oxygen of cash flow.

But to see one canary doesn’t necessarily give us good direction. What are the other canaries to watch? There are so many. We’ll look at just a few.

This week we’ll focus on specific “non-traditional” revenues, forms of value added taxes, or goods and services taxes [Wikipedia] based on your travel, entertainment and gambling activities. In the coming weeks, we’ll observe others.

WHY SHOULD YOU CARE ABOUT NON-TRADITIONAL REVENUES?

This term is used by businesses and non-profits to identify sources of revenue beyond their usual sales, fees or grants. But for government, it has a special meaning.

Local, state and federal governments have shifted the economy over the past few decades to rely on non-traditional revenues. And that reliance is much deeper than you may be aware.

Entertainment taxes: Many urban cities or counties have have instituted an entertainment tax, a 1% – 10% add-on to sales taxes. Purchase a concert ticket, order a drink at a restaurant, stay at a hotel, etc., and you may be paying to subsidize a convention center, a tourism promotion agency, a zoo, or other “regional assets”.

But these fees could be much more. FRAMES is the biggest global convention in Asia on the business of entertainment. In a 2003 presentation, Indian government officials stated that entertainments taxes total 120% of the actual cost of entertainment services.

“Sin” taxes: Likewise, it is easy for politicians to justify increasing taxes on selected activities that are considered optional and not in the best interest of society. Purchase a pack of cigarettes, buy another drink, gamble a bit, and you might be paying a premium to subsidize drug and alcohol treatment or other human services, your local playhouse, etc.

Lottery revenues: It is/was illegal and considered immoral for private bookies to run numbers and for individuals to bet through them. But it is legal and respectable for states to run lotteries and individuals to bet at every grocery and convenience store in the nation. Your state’s education for children, services for seniors, and other human support services are now very dependent on lottery funds. In the U.S., 43 states now operate lotteries. [Wikipedia]

How dependent are we now on lotteries to fund our society? Pretty darn dependent. Cultural Informationeast jump and Research Centres Liaison in Europe published Gambling on Culture: State Lotteries as a source of funding for culture – the arts and heritage.

Some reports indicate lottery revenues are declining. Texas’ lottery revenue decreased $102 million or 2.7% in the last fiscal year. This decreased public education revenues by $49 million. In October, Rhode Island officials acknowledged that their gambling receipts will fall $11.1 million behind earlier estimates for the year.

But the Boston Herald reports the AP story today that Many states’ lottery sales are rising in recession.

“More than half of all states with lotteries have reported rising sales over the past six months, and some researchers say financial insecurity might be driving people to risk more of their money than usual on $1 and $5 instant scratch-offs and other daily games in hopes of a big payoff.”

Why are more people buying lottery tickets? The Tax Foundation asked a few weeks ago, Does Lottery Revenue Rise or Fall during Economic Hardship? Their conclusion:

“… some people see the lottery as a solution to financial hardship and spend money on it when they can least afford it.”

Global Investment Trends published an article that makes a lot of sense to me, The Lottery Scam. The article investigates the real odds of winning with the question:

“Would you like to pay a 75% sales tax? This is what you are paying when you purchase a lottery ticket.


North America Casinos
click for map

Gaming revenues: Regions, states and countries fight over gamblers’ revenues. WorldCasinoDirectory.com offers an interactive map of 1,511 casinos in North America. It’s missing a few, but the visual impact is overwhelming. Some casinos are seeing steady revenues, but others are dying. Las Vegas gaming revenues fell 26% in October.

Still others are just now getting into the game, such as Ohio.

But think BIGGER. Tie this into underlying shifts in awareness. Planetizen tracks a wide range of urban development issues. Planetizen’s What We Really Need to Learn from Las Vegas, a review of the recent Alternet article, Leaving Las Vegas: Are Americans Ready to Put Cataclysmic Consumption and Hedonism Behind Them? focuses on key issues beyond who gambles with their money:

“Las Vegas has always epitomized American excess. But with its water supply running out and its constant illumination warming the planet, it also represents the extent of our economic and ecological unsustainability.”


North America Casinos
click for map

I posted two articles last year on the water economy in Peter Panepento’s great blog, GlobalErie, Correct Thought: Are There Silver linings In Our Water Supply, and More on Less Water.

Look at the map of droughts in the U.S. There’s an obvious reason why more folks around Las Vegas are thinking about water.

There are many more canaries to watch. We’ll discuss some of them as we go forward, but it’s more important now to jump into practical issues for you, your family and your business.

WHERE IS THE UNIVERSE MOVING US AND WHAT ARE THE PRACTICAL IMPLICATIONS FOR YOU?

We have one more stop to make before identifying specific opportunities being brought by the changes. Come back at 5 pm today (Eastern time) for Understanding the Big Economic Picture – Debt and Money.

Until then, be well.

Sincerely,

David VanAmburg

The story of the photo above

As we are gripped by the world’s daily events, we tend to lose the anchor of our surroundings and history. We’re told that the hills of Pittsburgh, Pennsylvania were created by glaciers passing over the land. The topography has left much of the urban city forested. My son, David D. VanAmburg, has lived in Pittsburgh for many years, walking,  exploring and photographing the largely lost paths, walkways, parks and cemeteries throughout the hills of the city. This photo is from a path overlooking Arlington Ave. in the city’s south side.

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3 Responses to “What Are the Canaries In the Economic Coalmine to Watch?”

  1. Danny Lucas Says:

    Part 1 of 2 comment due to bandwidth lack in Erie, PA:

    When ATT was broken up by the government into "Baby Bells" ostensibly to create competition, Bill Gates had yet to not graduate from college and bring on PC universal. The PC industry, internet access, cell phones, wireless anything, and a host of electronic doo-dads ALL serve as a revenue bonanza for the government. Taxes on these items are NOT enough. Surcharges are added to inflate the actual tax.

    None of this was expected when the Bells were born, to increase competition.
    In reality, communications industry has coalesced, congealed, and coagulated into a consistent stream of growing revenue for the government……without consent of the people or by the people.
    But FROM the people, the money doth flow to Washington via this language tax.

  2. Danny Lucas Says:

    Part 2 of 2 comment due to bandwidth lack in Erie, PA

    I look forward to lining up your canary of Larry Flynt obtaining bailout, along with these canaries of revenue enhancement, and introducing them to the middle bird.

    Let's see what the Yellow Bird has to say at 5 o'clock!
    "Did you lady friend leave the nest again?
    That is very sad, makes me feel so bad.
    You can fly away, in the sky away.
    Your more lucky than me."

    Best regards,
    Danny Lucas

  3. dvanamburg Says:

    Danny, I am impressed that you can keep a sense of humor about this. Made me laugh. :) Thanks for your wonderful comments, as always.

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