By David Cay Johnston
March 30 Politicians in both parties are betting
that allowing more gambling will make them winners at the polls
by raising revenue without appearing to raise taxes.
Governors Andrew Cuomo of New York and Steve Beshear of
Kentucky, both Democrats, each want seven casinos.
In Kansas, where the state owns casinos, Governor Sam
Brownback, a Republican, wants more gambling money to pay down
In Minnesota, Governor Mark Dayton of the
Democratic-Farmer-Labor party wants more gambling to finance a
new stadium for the privately owned Vikings football team.
Florida legislators are mulling three casinos, one in Miami.
Illinois lawmakers may allow a casino in Chicago.
In Texas, Governor Rick Perry says he opposes more gambling.
Yet eight years ago he called the legislature into special
session to allow gambling at the gas pumps to help finance
schools (). He lost that bet.
Egging on these and other politicians is anti-tax crusader
Grover Norquist, who has made "tax" the vilest four-letter word
in American politics. Norquist wrote Texas politicians a letter
in January saying that more gambling is better than more taxes.
As a longtime student of gambling companies and their
regulation, I find these developments troubling. People who want
to play should have an honest place to wager. But states should
only allow, not encourage, gambling. Basic government services
should not depend on gambling revenue, as Perry's school finance
No matter how much gambling the law allows, taxes on the
money players lose will never be enough to finance the
government services on which jobs and private wealth creation
$24 BILLION IN 2010 REVENUES
Gambling generated $24 billion for the states in 2010, about
2 percent of their total revenues, data collected by the
Rockefeller Institute of Government shows ().
Thanks to its lottery, New York got the most gambling revenue,
$2.7 billion, more than Nevada and New Jersey combined.
Tax revenues from gambling are down in both West and East
Mammonopolis, in part because of a weak economy. In the west,
Nevada gamblers lost $3.8 billion last year, down 12 percent in
real terms from 2000, according to the University of Nevada ().
In the east, Atlantic City players lost $3.3 billion last year,
down 39 percent from their inflation-adjusted loss of $5.4
billion in 2001, according to the state of New Jersey. The only
growth is in betting near home, which the industry calls
"convenience play." Slot machines took more money from players
in Pennsylvania than Atlantic City last year.
Nelson Rose, the Whittier College law professor who
developed the theory that America is riding its third historic
wave of gambling, says, "we are decades away from market
saturation" for convenience gambling.
The first two gambling waves ended in scandals, the first
between 1820 and 1840 because of dishonest games, the second in
1890 because the nationwide Louisiana Lottery corrupted
While the third wave has yet to crest, a potential new
scandal lurks in proposals to initiate legal online betting.
The U.S. Justice Department issued a formal opinion in
December that the Wire Act, a law long-thought to bar Internet
gambling, applies only to sports betting. ()
This means that states running the Powerball and
Megamillions lotteries can operate multistate online poker and
other Internet betting.
But how will states know if online players are adults? My
1992 book "Temples of Chance" named 13- and 14-year-old children
who Atlantic City casinos plied with liquor, limousines and
luxury suites. How will the states keep underage gamblers using
their own money -- or Mom and Dad's credit cards -- from online
Another issue is who benefits from more gambling and who may
be maneuvered into supporting it. Consider the way Cuomo has
framed a casino expansion proposal.
New York has nine racetracks with slot machines, called
racinos. By proposing only seven casino licenses, Cuomo
initiated a variation on musical chairs, where two or more
operators will end up without a license when the music stops.
Want to bet whether this approach encourages political donations
and quiet favors?
The giant Asian gambling company Genting Group won the
contract for the Aqueduct racino in Queens last year. Now, Cuomo
has tapped Genting to build the nation's largest convention
center there, which it says it will do without subsidies.
I doubt many people would fly to New York to visit mundane
Ozone Park, an hour's subway ride from Manhattan's Broadway
shows, Fifth Avenue shopping and Times Square.
At the same time, Cuomo is proposing to close the Javits
convention center in the heart of the city, alarming Manhattan
hotel and restaurant owners, as it should.
Now let's connect the dots.
Genting would make more money if instead of a convention
hall in Ozone Park it erects a large open space for a full-blown
casino with baccarat, blackjack, craps, pai gow and poker. But a
casino requires legislative and voter approval, which may not be
easy to get.
Cuomo, by threatening to close the Javits center, has given
Manhattan hotel and restaurant operators an interest in
persuading state legislators and voters to make sure Ozone Park
becomes a huge casino complex and Javits stays open. That way
their income from Manhattan conventioneers would not be at risk.
I find it most curious that any politician trying to avoid
tax increases would consider a casino operator whose profits
will go to Malaysia instead of staying in-state.
People in New York, and elsewhere, should ask: What value do
offshore casino operators add? Why not license American gaming
companies? Or local investors? What motivated Cuomo to shun
Indian casino operators, like the Oneida Nation with its
well-run Turning Stone casino near Syracuse?
And all Americans should ask what the odds are that more
gambling will promote an industrious, thrifty society. And does
it make sense for your tax savings to depend on how many of your
neighbors make a losing toss of the dice?