by Professor Fred Gottheil
Hockey is a game. Chess is a game. Placing a $50 bet at the blackjack table in a casino is not a game. It is unadulterated gambling even though casinos insist that they're part of a gaming industry. But mislabeling is not the industry's only offense. In fact, it's insignificant compared to the damage the industry inflicts on the communities it invades. The industry feeds on the vulnerable, not unlike the narcotic pusher at high-school playgrounds. It promises nirvana but delivers despair. You've seen the industry's commercials on television and on billboards in town. There is no truth-in-packaging here.
What is particularly distressful about the gambling industry is that it has captured local and state governments by agreeing to share its gambling spoils. These governments close their collective eyes to the harm the industry commits and see only gambling-derived tax dollars flowing into their revenue coffers. Some state and local governments even vie for the right to inflict on their constituents the psychological, social, and economic pain generated by commercial gambling.
To be sure, a $50 blackjack bet may be no more than a plaything to a dentist on vacation who decides to spend an evening at the casino. After all, gambling is not an activity that defines his life or even his leisure hours. It's a once-in-a-while venture, a trip to the other side, so to speak. Moreover, his $50 or even his $150 loss at the tables represents no more than an expensive meal at a fine restaurant. And it is certainly small potatoes compared to his $240,000 annual income. In truth, there are a lot of folks - men and women - like him at the casinos; getting a rush at the roulette wheel, the blackjack table, and the slot machine. Few expect to go home winners and few do. So what's the beef?
The problem is not the once-in-a-while-at-the-tables dentist. It is instead the very many more who are not dentists, who do not earn $240,000 annually, and who are at the tables far more than once-in-a-while. They're encouraged to live on false hope, bet after bet, loss after loss. If they make that $50 bet, say, once a week, for just 30 weeks a year, that adds up to a $1,500 annual loss. If their annual income is $25,000, that loss represents six percent of their annual income. Suppose the government collects 20 percent of that $1,500 loss. That's equivalent to $300 of tax revenue. It's a government windfall that masquerades as a tax on the casino. Of course it's not. It's a tax on the people.
But that $50 illustration understates by a long shot - pardon the metaphor - what really goes on at the casino. What if the gambler bets and loses not $50 but $100 a week? We're not yet in a world of fantasy, are we? Now you do the math. That eats up 12 percent of the gambler's $25,000 annual income. Getting serious? I think so and I think you might think so as well. And we haven't touched the issues associated with the pathological gambler who will often bet away the food from his or her family table, if not the table itself.
Gambling is a cruel example of a regressive tax. The richer the gambler, the less percent of his or her income is gambled away by a $50 bet. Conversely, the poorer the gambler, the greater is that $50 bet burden. That is to say, gambling is a rather destructive hidden tax that weighs more heavily on the poor.
Governments try to camouflage its destructiveness on lower-income people by claiming to earmark gambling-derived revenues to spending on public education, public safety, and public parks. But it's illusory. What that earmark often does is free up revenue to bloat non-basic government spending. In fact, our mounting state debt is used as an excuse to invite in casino operators.
The gambling industry also insists that casinos create employment and income. That, too, is sheer nonsense. Imagine a father facing two options: (1) going to the casino and betting away $100 at the slot machines or (2) taking his daughter to a baseball game, where he buys $100 of tickets, hotdogs, drinks and souvenirs. The employment and income he creates at the casino is only employment and income lost at the ball game. It's strictly a matter of what kind of employment and income the $100 generates.
Is gambling a serious drain on the economic well being of low-income people? Look at the data. A decade ago, the bipartisan U.S. National Gambling Impact Study Commission sponsored by U.S. Senator Paul Simon found that 80 percent of gambling revenue was derived from households earning less than $50,000 annually and gamblers with annual incomes below $10,000 spent almost three times as much on gambling - in dollar amounts - than did those with incomes exceeding $50,000. And what was the government take? These essentially low-income gamblers had to lose $84 billion to casinos and lotteries for the participating state governments to rake in $24 billion of new revenues. While it may not be criminal in a legal sense, it's a national disgrace nonetheless.
But disgrace or not, the gambling industry legitimately argues that there is a serious philosophical issue lurking in the background on any discussion of gambling. They refer to the matter of individual free choice; the exercise of our liberty to make whatever choices we wish; whether those choices end up being good ones or bad. After all, many of us choose to eat too much or drink too much, or work too little, or study too little; all with potentially dire consequences. Should we disallow, then, someone from gambling away life savings or the family farm even if the gambler willingly chooses to make the bet? It's a tough question, to be sure. But it's not something societies haven't grappled with in other instances.
For example, we do insist that workers contribute to social security even though many would prefer to chance retirement on their own. We do insist that children attend school even though some families might prefer them not attending. We do insist that all airline passengers be scanned at airport security checkpoints even though a few - insisting on their individual rights - would be willing to chance it. And to the chagrin of some, we make illegal the market for cocaine and heroin In these cases, as in many others, communities weigh the consequences of allowing or disallowing activities that they believe are in the long run beneficial or harmful to not only participating individuals but to the communities they live in as well.
Which brings this gambling issue home to the State of Illinois? The December 1 vote in Springfield to create 13 new casino facilities statewide is a challenge that citizens of Illinois must accept. Enormous pressure has been exerted by the gambling industry on a somewhat compliant Illinois Senate to vote in favor of adding more gambling casinos in Illinois.
Consider one innocent-enough location: Danville, Illinois. Why target Danville? Because the gambling web there is extensive. Not only are there many towns and villages within a 50-mile striking distance - including Champaign-Urbana - but there are 36,000 University of Illinois students just 35 miles away, not to mention thousands of students at Parkland College, Danville Community College, and Wabash College. That kind of population had to be on the minds of the casino planners. Paul Simon's Study Commission noted that college students are twice as likely to get hooked into a gambling addiction than are other adults. The gambling industry does its homework well. It knows where to hurt.
Admittedly, Danville, like the dozen other targeted communities, is a luscious plum ready for the picking. But will the gambling industry succeed? It depends on our reaction, our voices, our remembering who in our government voted which way. What appears to be nothing short of amazing is that only a month after our national, state, and municipal elections were held in which candidates were claiming to fight for the interests of their communities, re-elected members of the Illinois Senate - many liberal-professing - voted for this major gambling expansion. Governor Quinn has so far indicated that he opposes the casino expansion. We must hold our representatives accountable.
Professor Fred Gottheil
Department of Economics
University of Illinois
