One by one, states surrounding Kentucky have legalized casino gambling, leaving the commonwealth one of only 10 states that haven’t yet authorized casino gaming within their borders.
Not that casino backers haven’t tried. For six years running, bills to permit gambling have been introduced in the General Assembly. This year was thought to be the year it finally passed, but, with (a short time) left in the legislative session, the gambling effort may be too much to enact this year.
Even if it dies without action in this session, it’s almost a certainty that gambling legislation will return next year. Legislators and the public should accept that gambling has already come to Kentucky via its neighboring states and vote to establish casino gambling so Kentucky residents can benefit from the jobs and revenue that casinos can create.
Three gambling bills are currently on file in the Kentucky Legislature. It’s likely just a matter of time before casinos are permitted in Kentucky, and legislators and the public should insist on strict guidelines for regulating, controlling and taxing casino gaming. Whatever eventually passes should contain several principles:
• The number of casinos should be limited. The leading bill calls for eight casinos – five at racetracks and three elsewhere. That may be too many, as it’s the tendency of gaming to expand once it’s permitted in a state. And the public, as well as reluctant legislators, may be able to accept fewer casinos.
• Casino operators should be taxed heavily to maximize the revenue for the state. The leading bill in the Kentucky House would tax casinos at 25 percent of their adjusted gaming receipts for the first three years of operation, then at higher rates after that. Why start low? Ohio not only began taxing casinos at a higher rate (33 percent) but taxes gross gaming receipts, not adjusted receipts, which results in more revenue to the state.
• It’s important to levy high taxes because the impact of casino gambling on the overall tax revenue of the state can actually be negative, found a 2011 study by Douglas M. Walker of the College of Charleston. Money spent in casinos can mean money not spent elsewhere, which can result in less sales-tax revenue. But there are exceptions if the casinos are tourist destinations that draw out-of-staters or if the casino tax rate is high enough to overcome any decline in sales taxes.
• Don’t overestimate the revenue that will come from gambling. It’s easy to get carried away on revenue projections, and casino owners can inflate estimates to make the prospect of new dollars look more appealing. But the growth of casinos and other forms of gambling mean it is becoming a more competitive business. The Pew Center for the States studied 10 states that had legalized or expanded gambling in the last decade and discovered that revenue usually fell far short of initial projections.
• Invest the new revenue in something that will pay off for the state in the future. House Bill 68 calls for 50 percent of the revenue to be spent on early childhood education and other educational purposes, but it also says 25 percent shall be used for “other purposes.” That’s too open-ended to win the confidence of the public and reluctant legislators. Dedicate that money to investments that can pay off in jobs, such as roads, bridges and job training.
In some ways, states have become addicted to gambling as a way to shore up revenue in a time of scarce resources and as an alternative to raising taxes. Legislators and the public should realize, though, that casino gambling is not a quick fix and cannot replace the need for genuine economic growth. In the short term, casino gambling can provide a boost to a state and regional economy, but that boost tends to die out over the long term, the College of Charleston study found. Competition for gambling dollars within the state (such as the horse tracks in Kentucky) and competition with online gaming and with casinos in neighboring states tend to diminish the long-term impact, the study found.
Casino opponents often cite the social costs of gambling, in particular gambling addiction, as well as the prospect of increased crime, as reasons to vote against gambling. About 1 percent of the population can be considered pathological gamblers, but these people will gamble illegally or go online or to other states to satisfy their addictions. A portion of casino tax revenue can be used to warn of problem gambling and to treat it.
While there is reason to expect a relationship between casinos and crime, the study found “no conclusive evidence” that such a link exists and found flaws in previous studies on crime and gambling.
Like it or not, casino gambling is here to stay. Kentucky policymakers should recognize that the state needs to capture its share of gambling revenue and draft a bill that will have the confidence of the public by limiting the number of casinos, taxing casinos enough to boost overall tax revenue to the state and by investing that revenue in long-term growth that can benefit all Kentuckians.
— The Kentucky Enquirer