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The Real Impact of the Explosion in Gambling


Government doesn't care where tax revenue comes from -- or who's affected.

Editor's Note: This article was written by James Quinn, a senior director of strategic planning for a major university. James has held high-level financial positions with a retailer, home builder, and a university in his 22-year career. This article originally appeared in the July 2009 edition of the Casey Report.

The world is a vampire, sent to drain
secret destroyers, hold you up to the flames
and what do I get, for my pain
betrayed desires, and a piece of the game
even though I know -- I suppose I'll show
all my cool and cold -- like old job

despite all my rage I am still just a rat in a cage
someone will say what is lost can never be saved

--Smashing Pumpkins, "Rat in a Cage"

Americans throw away close to $100 billion per year gambling in casinos and playing lotteries. This only includes the amount spent legally. Illegal gambling accounts for billions more. This is the net amount spent. In reality, $60 billion is spent on lottery tickets, or $600 per household annually. Another $100 billion is squandered in gambling casinos. This amounts to $950 per household.

The $160 billion spent on gambling each year is indicative of the get-rich-quick attitude of many Americans. And households with incomes under $13,000 spend, on average, $645 a year on lottery tickets -- about 9% of all their income. Our government feeds this addiction by siphoning off billions in taxes from these gambling revenues to redistribute as they see fit. Government-sponsored gambling is a regressive tax on the low-income people and is immoral. Politicians have become addicted to the tax revenues being drained from the underprivileged in the country.

Gambling was illegal in the US until the Great Depression. Nevada legalized it in 1931 and over time, Las Vegas became the gambling capital of America. Atlantic City joined the club in 1978, building casinos in the midst of crime-ridden slums. Gangster Bugsy Siegel opened the Flamingo Casino in 1947 and an era of mob involvement began.

Over the last three decades, gambling has exploded as Indian reservations have been allowed to open casinos as payback for three centuries of destruction and persecution. Riverboat gambling and lotteries have sprung up across the nation in order to fill the state coffers. Abetted by Congress, legislatures from 48 states now sponsor gambling operations and lottery monopolies to balance their budgets on the backs of their underprivileged and most susceptible citizens while basking in the virtue of fighting tax increases.

Rather than control costs, states find it much easier to lure people from low-income households into parting with the little money they have. The amount of money frittered away on games of chance rose by 59% between 1999 and 2007. This coincided with the national debt-induced housing frenzy and the high-stakes gambling attitude on Wall Street. It warms the cockles of my heart to think that people were taking out home-equity loans to gamble at casinos. In 1999, the bipartisan National Gambling Impact Commission found that 80% of gambling revenue comes from households with incomes of less than $50,000 a year. Those who can afford least afford to lose are those that are spending the most.

The incredible escalation of gambling -- encouraged and sustained by local and state governments -- has done long-lasting damage to the social fabric of society. The gambling industry has grown tenfold since 1975, with 41 states now running weekly lotteries. Nineteen states now have legalized commercial casinos -- owned by companies like Las Vegas Sands (LVS) and MGM Mirage (MGM) -- while 29 states have Indian casinos. There are a total of 450 commercial casinos in the country.

The first online-gambling site launched in August 1995. It's currently estimated that there are well over 2,000 Internet gambling websites offering various wagering options, including sports betting, casino games, lotteries, and bingo. Internet-gambling revenue for offshore companies was estimated to be $5.9 billion in 2008 from players in the United States and $21.0 billion from players worldwide, according to H2 Gambling Capital. Two-thirds of all adults placed some kind of bet in the last year. The social stigma of gambling has fallen by the wayside.
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