“Yes on Question 3” by John Edward

John Edward teaches economics at Bentley and UMass Lowell. He’s a frequent contributor of columns on economic issues.

Question 3: A YES VOTE would prohibit casinos, any gaming establishment with slot machines, and wagering on simulcast greyhound races.

Supporters of question 3 cite social, ethical, moral, and quality-of-life objections to casinos. They are all valid fears.

I will make the economic case against casinos. Casinos will destroy jobs. Casinos will not generate the promised revenue. Gambling is a terrible choice as a form of taxation.

Gambling advocates say casinos will create jobs. They will generate temporary construction jobs. So would investing in the repair of roads and bridges. So would building new manufacturing and research facilities. We should be constructing things that build up our economy.

There will be permanent jobs at the casinos. Why – because people will spend money at them. Where will the money come from? Casinos will divert spending away from local convenience stores, entertainment venues, restaurants, and retail. People who currently spend in Greater Lowell will be spending at “destination” casinos.

Economist Joseph Schumpeter coined the term “creative destruction.” He observed that the progress of innovation destroys jobs and entire industries.

Destination casinos will create jobs in an old industry and destroy jobs in the creative industries for which Lowell has become a destination. There is nothing innovative about casinos.

Casino proponents trumpet the jobs created. They overlook the jobs lost — a waitress here, an artist there, a job or two at a time. However, they will add up. Some businesses will go out of business. The Final Report of the National Gambling Impact Study Commission cited the potential for job creation but concluded these results: “may mislead readers to conclude that the introduction of gambling activities in an area will result in significant benefits without attendant costs, which may, in fact, overwhelm the benefits.”

How permanent the casino jobs will be is not clear. Four casinos have closed in New Jersey this year. Casinos were great for Las Vegas when they had a near monopoly. Casino expansion has diluted the market. In the northeast, Connecticut, Rhode Island, Maine, New York, New Jersey, and Pennsylvania all have casinos.

Casinos are facing stiff competition from on-line gambling. Morgan Stanley projects the U.S. on-line gambling industry to generate $3.5 billion in annual revenue by 2017. They recently lowered their estimate due in part to market saturation.

A bet on casinos is a gamble on an industry in decline. A recent press release from Moody’s Investors Service: “revised its outlook on the US gaming industry to negative from stable. The negative outlook reflects recent declines in comparable monthly gaming revenue for most jurisdictions.”

Gambling supporters promote casinos as a way to keep money in the state. They claim Massachusetts residents spend about a billion dollars at casinos in adjacent states.

The former UMass Dartmouth Professor who came up with the estimate used a questionable method of counting cars by state license plates in casino parking lots. The pro-casino forces provided him with funding. Even so, the numbers have been going down. In 2006 Massachusetts residents spent an estimated $876 million at Connecticut casinos, in 2011 $624 million, and $554 million in 2012.

Massachusetts residents spend a lot of money on a lot of products produced out of state. As examples, we currently import large amounts of medical diagnostic equipment, voice and image processing machinery, electronic integrated circuits, and artificial joints. Massachusetts could and should manufacture products like that.

Why should we promote an industry just because we import? Why should we promote an industry where we have no competitive advantage? Why should the Commonwealth of Massachusetts promote an industry with the economic and social costs associated with gambling?

The state is currently addicted to lottery revenue. Beacon Hill will get addicted to the gaming tax applied to casino revenue. Lottery revenue will fall immediately. Casino revenue will decrease as other states dilute the market even further.

Gambling is one of the worst ways to generate revenue. Gambling taxes are very regressive – they fall most heavily on low-income earners. They will reduce sales and excise tax revenue as spending is diverted to gambling.

Massachusetts already has a very regressive tax structure. A study by the Institute on Taxation and Economic Policy found that low-income earners in Massachusetts pay state and local taxes at a rate twice as high as the top 1 percent of income earners.

A tax on gambling is one of the most regressive forms of taxation available. A study by the National Center for Policy Analysis estimated that low-income earners pay gambling taxes at a rate ten times as high as high-income earners.

The social problems that come with casino gambling are excellent reasons to repeal the casino legislation. An even better argument might be that the economic arguments offered by casino fans are so weak.

Vote Yes on Question 3.

4 Responses to “Yes on Question 3” by John Edward

  1. Publius says:

    What is wrong with taxing gambling. I do not gamble, so I lose nothing. Besides, gambling is voluntary.

    If gambling is a bad form of taxation, why haven’t you advocated the abolishment of the state lottery?

  2. DickH says:

    I will vote Yes on Question 3 (i.e., to revoke the legislature’s allowance of casinos). I don’t oppose gambling or casinos necessarily. If that’s how people want to spend their disposable income, that’s OK with me. What I do oppose is our search for gimmicks to fund governmental services. If we value a service, such as decent roads or good schools, we should be willing to pay for it. I would apply the same logic to the lottery.

  3. Anonymous says:

    In response to Publius:
    1) Nothing wrong with taxing gambling, what is wrong is employing a tax that is so regressive. Anyone concerned about inequality, and everyone SHOULD be concerned about inequality, would find something wrong about a new tax that makes inequality even more severe.
    2) Gambling is voluntary. So to is purchasing most of the products to which sales and excise taxes apply — still a tax (although in the case of gambling we also have the issue of promoting addictive behavior).
    3) How would you know if I have or have not advocated for the abolishment of the state lottery?

  4. David M says:

    In the USA we should be free to enjoy casino gambling if we want. I don’t need anyone to look out for me, in fact I wish the do-gooders would mine their own business. I drive down to Foxwoods to gamble, it would be nice if I could save some gas and gamble close to home in Massachusetts.