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The $75 Million Payoff
[February 28, 2003]

By S. M. Oliva

Massachusetts Governor Mitt Romney recently unveiled a $22.86 billion state budget that includes arguably the strangest tactic for raising revenue in this time of renewed public financing deficits. Among other ideas for balancing the state’s budget without overall tax increases, the Republican governor plans to ask casinos in the region for annual payments of $75 million. The problem is, the casinos Romney’s hitting up for cash aren’t located in Massachusetts.

Romney is seeking what amounts to ransom payments from casino and racetrack operators in Connecticut, Rhode Island and Providence Plantations, and New Hampshire, states with more permissive gambling laws than Massachusetts. Connecticut, in particular, has become a popular gambling spot in recent years with the development of Indian tribe-owned casinos. Under Romney’s proposal, these neighboring casino operators would pay Massachusetts $75 million annually. In exchange, Romney won’t expand his own state’s gambling operations by allowing slot machines at four state-owned racetracks. In essence, the casinos would pay Massachusetts not to compete with them.

If a private business attempted to do what Romney is, they would likely face antitrust charges from the Federal Trade Commission or the Justice Department. It would be considered an illegal “restraint of trade,” even if it was a wholly voluntary and uncoerced agreement. In contrast, Romney is employing direct coercion—if not outright extortion—in seeking money neither he nor his state are entitled to. Romney’s defense is that since Massachusetts citizens visit their neighboring state’s casinos, the state should reap some of the benefits. This is something akin to a “commuter tax” argument. But the theoretical flaw is obvious: Massachusetts citizens only go to neighboring states to obtain something their own state won’t let them.

Romney, an adherent of the Mormon faith, which eschews so-called social vices such as gambling, seems to want the best of both worlds: the revenue benefits of gambling without actually having it take place in his state.

There is, of course, a larger question arising from Romney’s proposal, and that’s the extent to which state authorities use “legalized” gambling to raise revenue. On the one hand, gambling is a form of voluntary financing, since no individual is compelled to participate. But the problem is, in most states you can only gamble by the state’s permission, often in facilities directly owned by the government.

On top of that, state-owned gambling is rarely consumer-friendly. In a full-service casino, such as those in Las Vegas, the best odds from the gambler’s standpoint are at the blackjack and craps tables. Yet few states that allow marginal gambling ever permit these games. Instead, they emphasize lotteries and slot machines—generally two of the worst returns on the gambler’s dollar. In places where gambling occurs in the free market, most betters will not play the lotteries (or Keno), since they return the worst odds of all. This is precisely while most states that ban other forms of gambling run lotteries: they’re a great sucker bet which generate large amounts of revenue for the house. State-run gambling also tends to be horribly regressive in that it’s often designed to prey on poorer gamblers, who are more inclined to place long shot bets on lotteries.

Then there’s the simple basic hypocrisy of it all—private gambling is considered a “vice” that must be banned by force, but state-run gambling is a virtue that helps finance public services. As is the case with most businesses under prohibition, those who are willing to employ force will continue to profit from the banned enterprise. It’s no coincidence that Las Vegas was initially built by the Mafia. Mitt Romney may be no Bugsy Siegel, but they’re both practitioners of the same ideology—force is the proper way for men to obtain that which they want but cannot obtain voluntarily.

 

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