Capital Commentary is the weekly current-affairs publication of CPJ, written to encourage the pursuit of public justice.

Gambling for Tax Revenues

James Skillen


January 13, 2003

Following years of state government expansion, Maryland, like almost every other state in the union, is facing serious budget troubles due to the nation's economic slowdown. When the legislature opened its annual 90-day session last week, lawmakers recognized that their top priority must be to close a $1.7 billion gap between spending and income over the next 18 months. The state is required by law to balance its budget. Moreover, for the first time in about 30 years, the state will inaugurate a Republican governor—Robert L. Ehrlich, Jr.—on January 15. Ehrlich is committed to not raising taxes. So what will the state do?

Keep in mind the general idea behind "no new taxes": investment in productive business and commerce goes up with lower taxes, and more growth brings in more tax revenue, so everyone is better off. The state gets what it needs and business growth boosts jobs, private income, and private initiative. All of this is supposed to make for a healthier society.

One more thing. From the viewpoint of business and personal income, taxes can never be low enough. From the viewpoint of legislatures, tax revenues are never sufficient to satisfy all the spending desires.

And another thing. Why should the state impose taxes at all? Because the state has an obligation to uphold public safety and well-being—a public trust that is not reducible to the sum of all private interests and initiatives. So how much tax revenue does the state need to govern justly? The answer to that question depends, of course, on what lawmakers and citizens believe is the public good.

So what is the answer to Maryland's budget crisis? Governor Ehrlich and Senate President Mike Miller (a Democrat) want to approve slot-machine gambling (outlawed since the 1960s), figuring that taxes on slots will make a substantial dent in the budget deficit. Remember the outline above: don't raise taxes but encourage productive business growth to generate more tax revenue ... resulting in a healthier society. But wait just a minute! Gambling is a productive business? Government's encouragement of gambling helps foster a healthier society?

Fear not. Ehrlich and Miller have answers for skeptics like me. The governor is aware of the evidence that legalized gambling can bring in a host of social ills, like crime and drugs, which could force more state expenditures on police and social services. So he proposes to confine slots to just the state's four racetracks. And Senator Miller wants the new revenue to be invested in education—an important public good—to help justify state support of gambling.

Even before the governor has introduced his proposal to the legislature, however, contentious rumbling can be heard. If slots are good for state revenue, say some lawmakers, why not permit the machines in more places, allowing this productive industry to grow? And why, ask others, should we emphasize education expenditures? There are many other good ways to spend the new revenue. The legislative scramble to get a piece of the action has quickly become so unseemly (The Washington Post, 1/8/03) that the governor and senate leader are now threatening not to go forward with slots legislation. Which would almost certainly necessitate higher taxes.

However, almost everyone is convinced that more taxation would not serve the public good of Maryland. So in the end, slots will probably go through. A new industry will grow and learn quickly how to lobby the state in its own interest. More Marylanders will become productive gamblers, thus increasing both private initiative and public well-being. The state will need to spend more to fight increased crime and addiction, so it will approve slots for more locations to bring in more revenue. But at least taxes won't go up. And you call this progress in the public interest?

—James W. Skillen, President
    Center for Public Justice


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Capital Commentary is a weekly current-affairs publication of the Center for Public Justice. Published since 1996, it is written to encourage the pursuit of justice. Commentaries do not necessarily represent an official position of the Center for Public Justice but are intended to help advance discussion. Articles, with attribution, may be republished according to our publishing guidelines.”