With the Mass. Senate due to vote on the expanded gambling legislation later this week, I thought I would share my list of five reasons for voting No. The first two reasons are all about jobs and economic development, because I agree with the people from organized labor who argue that putting people back to work should be our first priority. I just don’t agree that legalizing predatory gambling is the right way to do it. The full list is at http://tiny.cc/FiveReasons-NoO…
Reason #1 – It’s economic cannibalism, not economic development.
Although industry advocates talk about an untapped market with hundreds of millions of dollars in potential gambling revenues, the truth is that those dollars are currently being spent on other things: on the Lottery, on household and consumer goods, at local restaurants/bars, on movies/shows, etc. The gambling industry only makes money by re-directing that spending to casinos and slot machines — cutting into Lottery revenues, eroding spending at existing local retail, restaurant, and entertainment businesses, and undermining the ability of those businesses to continue to provide employment and pay taxes.
Legislators have included provisions to replace lost Lottery revenues, but at a much higher cost to Mass. residents. Because the Lottery returns a much higher percentage of gross revenues as Local Aid to cities and towns than would a tax on casino/slot machine revenues, Mass. residents will have to gamble away a lot more money to casinos and slot machines to make up for the lost Lottery revenues.
Proposed legislation contains no such hold-harmless provisions to save the local businesses and jobs that will fall victim to competition with casinos. Without the kind of cost/benefit analysis that accounts for this cannibalization of local economies — an analysis that industry advocates have understandably resisted — all we have to go on is the experience of other communities that have watched their traditional local economies fall victim to predatory gambling expansion.
Predicting the impact of re-directed consumer spending isn’t rocket science. There are only two potential sources of gambling revenues: in-state residents and out-of-state tourists. Earlier debates about casinos featured talk about attracting gambling tourists. Reality has set in, however, and proponents acknowledge that with “destination casinos” in an increasing number of states, local gambling concerns will have to depend on the patronage of Massachusetts residents for the overwhelming majority of their revenue.
Proponents estimate that Mass. residents spend about $1.1 billion annually on gambling trips to Foxwoods and Mohegan Sun in Connecticut and Twin Rivers in Rhode Island. The Spectrum Report talks about recapturing half of that, or approximately $550 million, of which 27% or $148 million would be paid in State taxes. [www.mass.gov/Ehed/docs/EOHED/MA_Gaming_Analysis_Final.pdf] If that $148 million were all that proponents were promising, the Legislature wouldn’t be seriously considering introducing Class 3 gambling into the State, with all its related problems and costs. Proponents’ revenue estimates are much higher, based on assumptions that Massachusetts residents could potentially spend another $1-2 billion on in-state casino/slot machine gambling, if given the opportunity.
That is $1-2 billion in addition to the $1.1 billion that is reportedly going to out-of-state gambling concerns, and the $4.7 billion that Mass. residents annually spend on Lottery products. Of course, like casino/slot machine gambling, Lottery spending — which averages out to $720/person/year and upwards of $1,800 per household per year — isn’t evenly distributed across the population: these averages mean that some households are spending many thousands of dollars a year on scratch tickets, Keno, and out-of-state slots.
You can be sure that nobody with a yen for gambling is putting money in their piggy bank waiting for the Legislature to legalize the slots in Mass. If there’s an additional $1-2 billion market for in-state gambling, it’s going to come out of Lottery sales, and at the expense of the consumer spending that sustains thousands of existing local businesses and their employees.
And, just in case anyone thinks that the State can harness all that demand and keep all those gambling revenues within our borders, think again. If Massachusetts builds casinos that threaten to lure Granite State gamblers, the New Hampshire Legislature is ready to license competing casinos at Rockingham Park and Seabrook. And as soon as Class 3 gambling becomes legal in Massachusetts, Indian tribes that aren’t included in the initial deal-making are free to develop their own tax free establishments. So much for all that market share. Passage of the proposed legislation simply fires the starting gun in a race to the bottom.
We know from national experience that when casinos from one state are competing with casinos in neighboring states, legislators hear calls to reduce the tax rate, to increase the number of slot machines, to loosen restrictions on the service of liquor, to increase hours of operation … all in the interest of increasing revenues that allow bigger payoffs and better odds. Once we go down the path of legalization in Massachusetts, it’s only a matter of time before elected officials hear complaints that our casinos can’t compete with casinos in New Hampshire or Connecticut or Rhode Island casinos unless we relax our guidelines and lower the State’s “take”. So much for the promised revenues.
We’ve been through this before with other businesses that broke their promises to increase jobs or to stay in Mass. in exchange for tax breaks. Haven’t we learned anything about the ephemeral nature of “commitment” and “loyalty” from the arm twisting that happens when sports teams pit cities against one another? The reality is that no matter what kind of promises the gambling industry makes to get us to open the door in Massachusetts, the rules will change once the industry has a foothold here, and there’s no going back.
The gambling industry isn’t biotech or clean energy, which can capitalize on the State’s research and technological advantages to create products that bring in investment and customers from other states or nations. Legalizing and promoting Class 3 gambling merely creates an industry that will suck revenues out of existing local economies and re-direct it to sustain a handful of predatory enterprises.
In my next post, Reason #2, I’ll share my thoughts about why expanding legalized gambling isn’t either the quickest or most efficient way to create good jobs.