States May Not Find Jackpot in Gambling
IN Massachusetts, legislators are considering a proposal by Gov. William Weld to license three casino boats and electronic slot machines at horse and dog tracks as a means of raising $125 million in government revenues. In Florida, the state legislature is addressing suggestions for casinos on beaches and Indian lands.
To economist Paul Mason, state lotteries and expanded licensing of casinos reflects as much on the character of legislators as on the growing public tolerance of gambling.
``Government bodies are unwilling to raise revenues through blatant, out-and-out tax increases,'' says the professor at the University of North Florida, Jacksonville. ``So they are looking for taxes that are hidden.''
But gambling, says Robert Goodman, head of the Center for Economic Development at the University of Massachusetts, Amherst, is ``not the panacea'' for either state revenues or economic development as it has been sold by gambling interests. Mr. Goodman has completed a massive study on the economic side of United States gambling to be released next week.
``Even in the best of circumstances, it hasn't worked as a method for putting a lid on state taxes,'' he says. He's referring especially to the near monopoly New Jersey has had on casino gambling on the East Coast. New Jersey got 10 percent of state revenues from horse racing in the 1950s. Now there are 12 casinos in Atlantic City taking in billions a year. But New Jersey gets only 6 percent of its revenues from gambling. And Gov. Jim Florio saw his huge tax hike in 1990 as a necessity.
The 37 state lotteries typically return about half of their ticket revenues (totalling $24 billion in 1992) in prize money. About 8 percent covers administrative costs. The remaining 42 percent goes into state revenues. ``This is a very high tax rate - the highest in the country,'' Mr. Mason says.
It is also a regressive tax - low-income people paying a larger share of their income for lottery tickets than the well-to-do. In Florida, for example, those earning less than $10,000 a year have been spending an average 1.3 percent of their income on lottery tickets; those earning more than $70,000 a year use less than three-tenths of 1 percent of their income on tickets. In some states, the regressivity is worse than that, Mason says.
Though the odds are exceedingly slim, many of the poor dream of instant wealth through the vagaries of chance. Those with higher incomes don't suffer the pressures of poverty. ``Lotteries are a terrible idea,'' Mason says. ``They give legislators an excuse to raise tax revenues by preying on the vices of the public, and particularly on those with less education and lower incomes.''
Lottery revenues are often allocated to a ``good'' purpose - say education, as in Florida. But Mason notes that money is fungible. In 1988, before there was a state lottery in Florida, 63 percent of government revenues went to state education. Now only 54 percent does. State educators feel squeezed, despite lottery revenues. ``We are not getting the same amount,'' Mason complains.
Mason estimates that casinos pay 5 to 15 percent of gaming revenues in taxes. In a report in the American Journal of Economics and Sociology in July 1991, Mason and two other economists found the taxes on casino gamblers in Atlantic City and Las Vegas at best proportional to their incomes, and at worst, regressive. ``Exploiting the tired and poor,'' the study was subtitled.
Because the stakes tend to be high in casinos, fewer low-income people risk their money at the tables. But now casinos are spreading in the US and becoming more accessible to those with less travel money. They are also giving more space to slot machines or video poker - games more affordable for low-income people. So, Mason says, states may not only get smaller revenues than they anticipate from new casinos, but they may be taxing the poor more heavily.
Casinos, Goodman adds, take money away from other businesses, particularly restaurants, movie theaters, and other entertainment facilities, but also from clothing, furniture, and auto retailers. As casinos spread, that business loss will grow because new casinos will depend more on local residents as gamblers.
Further, with the increased automation of casinos, they increasingly are offering low-wage, nonunion jobs, Goodman says.