The following was prepared by the Lutheran Office of Public Policy – Maryland, Lee Hudson, Director. The Maryland Legislature has put a slots referendum on November’s ballot.
Slots Talk from LOPP/MD-the Policy
The ELCA social statement “Sufficient, Sustainable Livelihood For All” (1999) affirmed an historic commitment by this church and its predecessors to adequate and elastic public revenues, and against state-sponsored gambling.1 To appreciate the ELCA position it is necessary to unpack the hyphenated adjectival “state-sponsored.”
When the state raises revenue from gambling it goes into the business of granting permits for wagering through its regulatory authority. The licenses are contracts between the state and gambling interests to conduct games of chance in return for defined shares of the profits. The state’s share is “revenue.” The gambling industry business model becomes state revenue policy. Revenue will be made dependent on the volume of wagering. That produces two unhappy outcomes.
First, it creates inefficiency-to use a favored economics term-in revenue policy. Rather than revenue being raised directly out of the productive economy an entire industry is created to encourage the wager transaction. In contrast, the sales tax (another levy that wears the label “regressive”) is efficient because it’s in each transaction to which it applies, 6% as revenue. The State’s share of the take in the Maryland gambling plan will be $870 million, but it will only keep $640, about half the plan’s expected $1.3 billion gross receipts. That’s inefficient.
Second, slots will meet the revenue projections if and only if many Marylanders lose a lot of money. It’s estimated that Marylanders now lose about $225 million a year gambling out of state. To achieve revenue estimates from state-sponsored gambling Marylanders will need to lose that $1.3 billion figure. Those losses provide revenue and make Maryland a stakeholder in the business. Maryland must encourage its citizens to frequent slots parlors and lose a lot of money to pay the public bills. That’s poor public policy.
How do slots work? The slots business plan requires customers to stay in the facilities for extended periods; they will be open long hours every day of the year. Slots are profitable because they don’t need attendants: they pay out on a random schedule. The machines no longer use coins. The industry likes credit and bankcards. Typically players stay long enough to win a few times, but over several hours they will lose some too. The business plan has the house make ten cents, on average, from each wagered dollar.
It doesn’t sound like much, but the business plan is about volume. Over the course of an evening you might wager $100. On average you’ll leave with $90. Of the $10 loss, $3.30 goes to the house, $6.70 to the State. If the State expects $870 million…well, you get the point.
Of the revenue raised, $110 million will go to the horse racing industry and about $230 million goes for administrative and public costs, and other subsidies. $640 million will be left as actual “revenue” for the State’s budget.
The slots business model gets married to the State’s public revenue policy, as the State promotes more losses so it can pay its bills. That’s the ELCA objection to state-sponsored gambling.