Gambling: An Institutional Disaster

December 27, 2011

(Jan. 1, 2011) —

The thinking here about what is wrong with this Legislature has centered on gambling. That is gambling not in the gestalt but in the specific — state sanctioned, licensed and taxed. And no, this is not a sermon.

Moral concerns are only part of it. A citizenry putting its faith in numbers, the flip of cards or the roll of a dice makes for a weak economic, social and political base. Or conversely, a society providing its citizens no more hope of meeting aspirations than a stroke of luck is a stagnant society.

State-sponsored gambling once was a certain definer of third-world status. Now, though, the Indiana Legislature accepts without serious dissent the various justifications for its gambling operations — all of them promising increased revenue for an inarguable common good.

Absent from the Legislature’s discussions, predictably, is the corrupting influence to its own process, institutions and incentives — its soul, if you will.

“Proposed bans on political contributions from gambling interests are tacit admissions, in case anyone still doubted it, that the licensure process is particularly vulnerable to corruption,” wrote Guy Galvert for the Cato Institute. “Government piles on the regulations and then holds open the door to those seeking differential gains through political means.”

Note the pressure on the Statehouse to exempt casinos from any statewide smoking ban. Such pressure will increase with gambling income lagging during this recession.

The Legislative Services Agency estimates that Indiana would lose more than $180 million a year in taxes if gamblers couldn’t light up. A Senate GOP leader told the Associated Press last session that a hearing on a smoking ban was conditional on an exemption for casinos. “That’s just shooting ourselves in the foot,” he said in reference to losing revenue from sanctioned gambling.

But whose foot? Indiana citizens or career politicians? One can only wish that the Legislature protected other businesses with as much vigor. It was not long ago that our representatives in Indianapolis considered their top priority the creation and then strengthening of jobs and industries that provided salaries to support young families. It now seems most intent on creating more gamblers.

Officially licensed casinos and lotteries dominate our advertising mediums. Drop into a convenience store for a gallon of milk and you stand in a queue of the marginally employed waiting to buy or cash lottery tickets — that or cigarettes taxed at a rate just below what would support contraband.

“If we have to pay taxes,” the voice in our other ear argues, “we might as well pay them on something that brings enjoyment and relaxation.”

It is true that most of us can appreciate the challenge and occasional exultation of beating the odds, the sense of abandon that comes with spending a paycheck in defiance of that oppressive weekly budget. But that is to confuse apples (gambling) with oranges (officially sanctioned gambling).

An individual choosing to gamble can be a personal, family, moral or social problem. Official sanction, though, is an institutional disaster. It gives politicians an incentive to capitalizing on our lesser impulses — increasing the size and scope of government in the process, exorbitantly so.

On Nov. 8, 1988, Indiana voters approved a lottery referendum by 62 percent. They consequently and unintentionally created a new type of government revenue, one without political complaint.

Before, when the Legislature abused the power to tax our groceries, home or paycheck, we tended to gather in groups to march on Indianapolis to exercise legislative or judicial remedy. Gambling revenue, though, proved different.

Gamblers don’t organize. An incumbent is unlikely to be challenged at election time for squandering money diverted from money that itself was being squandered. Only the inheritance tax, a tax on dead people, is less activating, and it generates but a fraction of the revenue.

The politically powerful rightly see state gambling as revenue without accountability — the rarest of commodities in Indianapolis, money that can be spent however the leadership sees fit. As such, it is a chief financier of political ambition and the expansion of government beyond the public’s ability to monitor it.

So place all the bets you wish, fellow Hoosiers, officialdom still wins. We are learning that this was the worst deal Indiana ever made.

Craig Ladwig is editor of The Indiana Policy Review. Contact him at editor@inpolicy.org.


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