In a recent poll, a solid majority of New Yorkers favored legalizing casinos in the state to promote jobs and as a source of revenues for tax relief. But more than 30 years of evidence tells us that legal gambling often does neither — and when you add in the well-documented social costs of gambling, casinos can be a bad bet. Voters should take note.
The Sienna poll found that 55 percent of New Yorkers favor legalizing casinos “for the legislated purposes of promoting job growth, increasing aid to schools, and permitting local governments to lower property taxes.” That’s the misleading way the constitutional amendment on next month’s state ballot phrases the question.
By contrast, when Sienna asked New Yorkers if they favored casinos, without the leading language about tax relief and jobs, only 46 percent approved.
Few social phenomena of recent decades have been studied as closely as legalized gambling, including research from a massive federal project, the National Gambling Impact Study Commission established by Congress in 1996. It found long-term gains hard to see.
The mayor of Gary, Ind., for instance, told the commission that casinos opening in the mid-1990s were revitalizing his depressed city. Yet no such revival ever took place. Today, median household income, adjusted for inflation, is actually lower in Gary than it was 20 years ago; poverty is rampant. And last year a Christian Science Monitor asked, “Can Gary, Ind., Be Saved?”
One reason gambling often fails to meet economic projections: Studies promoting it total up the benefits, but ignore its costs. For instance, the new casinos in Atlantic City took revenues from other businesses, offsetting some of the extra economic activity.
New Jersey is still struggling to revive Atlantic City’s fortunes. A 2009 report by the Federal Reserve Bank of Philadelphia noted that vacant houses and lots were common in the city, and few stores had opened up to serve residents. “Furthermore, the level of non-casino employment has declined significantly,” the report noted.
Advocates also often overestimate the tax revenues that gambling will bring. A 2012 analysis by the Stateline News Service found that two-thirds of states that added or expanded gambling in the prior 10 years had failed to meet their initial projections for tax revenues.
And as more states OK gaming, they cannibalize business from one another. Jersey’s tax take from casinos fell from $477 million in 2006 to just $255 million last year. And worse is likely to come as states rush to approve online gambling.
Revenues from gambling, moreover, rarely spur true tax relief. Thanks to its massive lottery operations, New York state already garners more budget revenues from gaming than virtually any other state. But New Yorkers still endure the highest tax burden in the nation.
New Jersey was the fifth most heavily taxed state in 1977, the year before casinos came to the state, reports the Tax Foundation. After nearly 35 years with gaming, it’s the second most heavily taxed state.
These mediocre outcomes make the well-documented social costs of gambling important to consider.
The dirtiest little secret of gaming is that much of the revenues come from problem gamblers. A recent report from the Institute for American Values cites studies in places as varied as Montana, Louisiana and Ontario that have found that anywhere from a third to 60 percent of betting is from that small part of the population with gaming problems.
The sophisticated design of modern games adds to gambling’s allure. Electronic slot machines, for instance, are now “smart” machines programmed so that even when you lose you often come close to winning — which makes you want to play more. A Wisconsin lawyer, jailed for gambling away millions of dollars of his clients’ money, called electronic slots “the greatest drug there ever was.”
Rising problem gambling brings other woes. The most authoritative study of the link between crime and gambling (in The Review of Economic Statistics, February 2006) found that, in 167 counties with casinos, violent crime rose on average by up to 30 percent.
And when problem gambling grows, bankruptcy, unemployment and jail time also rise.
In short, the honest phrasing for the Nov. 5 ballot question would be: Do you favor legalizing casinos, given the industry’s long history of poor economic performance, disappointing tax revenues and contributions to social disorder?
Steven Malanga is senior editor of City Journal.