06.30.2009 0

Casinos: Coming to a State Near You?

  • On: 07/15/2009 10:34:56
  • In: Fiscal Responsibility
  • By Justin Williams

    With the current recession driving states to beg for handouts from the Obama Administration, some legislators will invariably begin to look at other areas for revenue. And some states will probably consider what could be called the “Nevada model.”

    The “Nevada model” began in 1931 with that state’s legalization of casinos, which in turn directly created one of America’s most desired vacation spots, Las Vegas. According to Nevada’s Gaming Control Board casinos raised 928.2 million dollars for that state just through taxes and licensing fees in 2006.

    Since the Nevada legalization of casino gambling — and various rulings simultaneously allowing Indian tribes to build casinos and states to regulate them – casinos have proliferated. And today, over 460 commercial casinos are currently operating in 12 states according to the American Gaming Association.

    Economics is all about incentives, incentives, and more incentives. So what is it that incentivizes the politicians in these states to legalize casinos? In a word: Greed.

    Economists Peter Calcagno, Douglas Walker, and John Jackson in their latest article featured in the Public Choice Journal produce some very interesting findings. When they evaluated increases in states’ long-term debt, the economists found that legislators were much more likely to legalize casinos in an attempt to secure more funds. In short, to feed the leviathan that is Big Government.

    Sooner or later, even the most thick-skinned politicians realize that raising taxes beyond a certain point becomes highly unpopular. So, in order to continue their spurring growth of government, they must look for other sources of funding. Enter casinos.

    Now, there is no doubt that casinos bring spillover benefits in the form of restaurants, and other business into each state. Casinos increase wages and create jobs.

    The American Gaming Association also reports that the gaming industry creates over 1 million jobs nationwide with casino employees earn[ing] $14.1 billion in wages (including tips and benefits) in 2008, more than $3.1 billion more than in 2000.



    So far so good, at least from an economic standpoint.

    But it is not simply more economic growth that casinos bring. Greedy politicians will surely offset these gains by growing Big Government even bigger. Which, in turn, triggers a tautology: the bigger the leviathan gets, the more it eats; the more it eats, the bigger it gets; the bigger it gets … ad infinitum, ad nauseum.

    And, in the end, the monster eats all around it.

    Now, this is not to argue either for or against casinos. Gambling has become as American as “hot dogs, apple pie, and Chevrolet” (well, two out of three ain’t bad). And as long as it is ordained and controlled by private industry, it’s largely outside the purview of political debate.

    But when casinos are used as a palliative to ostensibly relieve the pain of mounting taxes – while at the same time feeding the leviathan that devours freedom – the so-called cure only exacerbates the disease.

    And the “Nevada model” then becomes a model of despair.

    Justin Williams is the Senior Commentary Editor of ALG News Bureau.

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