Businessweek Archives

Gambling's Advocates Are Right But For The Wrong Reasons


Economic Viewpoint

GAMBLING'S ADVOCATES ARE RIGHT--BUT FOR THE WRONG REASONS

Many state and local governments face even greater fiscal pressure to raise taxes than Washington does. In the scramble for additional revenue, Mississippi and Indiana, along with Boston, Chicago, New Orleans, and the District of Columbia, among other localities, already allow or are seriously considering the enfranchisement of casino gambling and other gaming devices such as lotteries. I support this trend toward legalizing gambling, although my reasoning has little to do with revenues.

Mayors and governors drool in anticipation of what gambling taxes can do for their budgets. Nevada, for example, collects more than $200 million a year from its casinos, the state's largest employer, and New Jersey better than $314 million. Several Indian reservations--notably in Connecticut and South Dakota--have become rich from slot machines, poker and blackjack tables, and other gaming devices. The U.S. Supreme Court ruled in 1987 that reservations could operate gambling facilities comparable to any others permitted in their states.

As casinos spread across the country, however, the number of communities competing for the limited tax revenues from gambling will increase. They won't be able to duplicate the financial success of Nevada, Atlantic City, or the Indian reservations.

State and local governments must forget about gambling as a fail-safe jackpot. There is no way gambling is going to solve their fiscal crises. It would only add a modest amount of tax revenue. But there is this to be said for legalizing gambling: It would enable the many people who wish to place a bet to do so without patronizing illegal establishments and facilities controlled by criminals.

VENIAL SIN. For me, the issue comes down to this: The arguments against legalized gambling are specious, so why not allow it? The assertion by religious and civic groups that gambling is sinful and hence shouldn't be encouraged is of dubious validity. Gambling is surely less sinful than smoking and drinking, since smoking damages health, and drunkenness causes automobile and job accidents and domestic violence. And assuming so-called sin taxes should be proportionate to the degree of sin, the sin component of gaming taxes should be below the sin-tax rates on smoking and drinking. Federal and state governments together tax about 20% of cigarette and beer sales, while Nevada collects about 5% of net casino revenues in that state.

More than 30 states already encourage gambling by running enticing advertisements for state lotteries. The poor bet on these lotteries--as well as on illegal gaming such as numbers and card games. The rich can speculate as recklessly as they wish through buying and selling equities, options, real estate, and other highly risky assets. It is principally the middle classes that are affected by present restrictions on casinos and other forms of gambling. But few families in this group bet much of their income and assets in the attempt to hit it big.

Some opponents paint a picture of gambling addicts frittering away their life savings in pursuit of the big killing of their fantasies. Analysis of the betting patterns of lottery and casino patrons, however, shows that addictive gambling is not common--surely much less so than addiction to tobacco and alcohol. Few people buy so many lottery tickets that they jeopardize their funds for food and other necessities. Most casino visitors are middle-aged folks having a good time with friends. Why deny them the pleasures--thrills, even--they get from modest betting on lotteries and other gaming devices?

GONE LEGIT. Many of those opposed to legalized gambling don't care a fig whether the patrons would commit a sin or risk addiction. Their concern is with organized crime, which did, after all, create Las Vegas. But that was long ago, and nowadays reputable companies such as Hilton, Hyatt, Bally's, and Grand Casinos control most of the gambling facilities and hotel rooms in Las Vegas and Atlantic City and run the newly legalized casinos along the Mississippi River.

Organized crime thrives on illegal activities such as drugs and betting on numbers. Criminals have an advantage over honest businesspeople in bribing law-enforcement officials--and in using force to collect their debts. The influence of criminals on gaming would be reduced, not raised, if companies were able to operate casinos and other facilities on riverboats or anyplace else that is zoned for gaming. Many legitimate companies are eager to enter this industry as soon as it becomes a legal activity.

The fear of organized crime has encouraged state and local governments to operate state lotteries, the Off-Track Betting shops in New York City, and other facilities. But governments have been no more successful at these activities than they are at providing other services: New York's OTB offices are among the few unprofitable gaming establishments in the world. State lotteries have been slow to innovate, and they rip off their mainly less-

educated clientele by paying out only 50% of their revenue. By contrast, privately run casinos in Las Vegas and elsewhere are forced by competition to pay out about 95% of the amount wagered.GARY S. BECKER


We Almost Lost the Nasdaq
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus