Brian Goldman | Playing with house money

After spending a weekend in Atlantic City — where the benefits and consequences of legalized gambling are on full display — I was curious about the tax revenues generated from all those hours spent at the blackjack tables and slot machines.

What I found was surprising. Despite all the glitz and glamour in Las Vegas and in Atlantic City, it is Pennsylvania — the home of no Caesars, Harrah’s or Bally’s — that ranks number one in the United States in revenue generated from taxes on gambling.

In fact, it’s the only state that tops one billion dollars per year, fueled by a 55-percent surcharge on slot machine games, which is about seven times the Nevada rate. When you factor in the raw data — Pennsylvania is home to 10 casinos, while Las Vegas houses over 250 — it becomes quite clear that Pennsylvania is doing something right in terms of maximizing gambling revenue per property.

Or are we? There’s an inherent irony in the idea and application of so-called “vice” taxes — those levied on gambling, cigarettes, alcohol, even soda — that is not only contradictory but self-defeating.

The benefits of collecting taxes on gambling are both logical and oft repeated. It goes something like this: revenue raised from casinos are put towards alleviating municipal budget deficits, funding education and lowering property taxes. Most legislators repeat by this mantra ad nauseam when defending gambling taxes, such as democratic state Sen. John Yudichak, who stated that “very important things came out of that tax rate,” and went on to cite property tax relief as an example.

However, this benefit has a nasty kickback. Lower property taxes mean that voters and municipalities will expect these rates to stay low; at the very minimum, they don’t want property taxes to rise (and, for the sake of their votes, neither do their local legislators).

This creates a vicious cycle where gambling generated revenue stops becoming an added benefit to taxpayers and starts instead becoming an impenetrable aspect of the annual budget. In other words, it goes from budget relief to budget reliance.

For most other lines of an annual budget, that concept doesn’t raise any eyebrows.

But keep in mind who feeds the growing gaming revenues. The increasing dependence on these sorts of taxes to gain property tax relief necessarily mandates that people not only continue to gamble but do so at higher and higher rates to maintain the baseline revenues. Of course, this is not a theory but a reality ­— gambling is an addiction. Take a trip down to the relatively new SugarHouse Casino in Philadelphia and you’ll see the devastating effects.

In Britain, the explosion in gambling addiction has been heavily documented, with an estimated 600,000 having a compulsive gambling problem. That figure has doubled since 2004.

But the problem isn’t only a growing gambling culture that threatens to pull more and more citizens into its grasp to keep revenues healthy. There’s also a blatant disregard for how the increased revenue is spent. Despite the $1 billion-plus revenue brought in from gamblers, the state of Pennsylvania allocated only $3.2 million to the health department for treatment for compulsive gambling from 2007 to 2009.

It gets worse. Only $750,000 of that money was actually spent by the Bureau of Drug and Alcohol Programs, which handle rehabilitation strategies, by 2010. Only 85 Pennsylvanians received services during this time; there are estimated to be approximately 90,000 compulsive gamblers in the state, according to the Pittsburgh Post-Gazette.

Instead of using every last penny of gambling-generated revenue to appease the people of Pennsylvania with artificially low property tax rates, the state would be better served capping the revenues spent on property tax relief and education at a certain percent and devoting the remaining dollars to rehabilitation initiatives and programs. Of course, that would lower the number of compulsive gamblers in the state and hurt revenue in the process, an outcome that the Pennsylvania budget wouldn’t be fond of.

Pennsylvania is making a killing off the addictive nature that gambling fosters. The least legislators up in Harrisburg can do is put a more significant portion of revenue toward quelling that addiction.

Brian Goldman is a College senior from Queens, N.Y. His email address is briangol@sas.upenn.edu. The Gold Standard appears every Monday.

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