RESEARCH Business Economy

GAMBLING
Recriminalize or limit legalized gaming, expert says

Mark Reutter, Business Editor
(217) 333-0568; mreutter@uiuc.edu

6/1/03

Photo by Bill Wiegand "The best approach from both a social welfare and economic perspective is to recriminalize types of legalized gambling activity," says John W. Kindt, an Illinois professor of business and legal policy.

CHAMPAIGN, Ill. — The gambling habit of William J. Bennett, "drug czar" under the first President Bush, has brought to the fore the issue of how legalized gambling has encouraged addictive and problem gambling in the United States, according to an expert at the University of Illinois at Urbana-Champaign.

John W. Kindt, a professor of business and legal policy, says that under the guise of "harmless entertainment," legalized gambling has created 1.5 million problem gamblers nationwide. "The gambling problems evinced by Bill Bennett highlight how deceptively gambling is marketed by state and local governments, and how it can ensnare even the most vigilant," Kindt said in an interview.

Bennett’s taste for high-stakes wagering – and $8 million in losses – was encouraged by casino operators who offered him free trips to Las Vegas on Lear jets and six-figure lines of credit. Surveying the literature on gambling in a just-published article in the Southern Illinois University Law Journal, Kindt wrote that because casinos gain a disproportionate share of revenue from problem gamblers, they allegedly lure this segment of the population to gaming tables through a host of questionable practices. "These have included tracking gamblers by frequent-gambler cards inserted into electronic gambling devices, as well as credit cards that earned points toward casino promotions," he wrote.

While state and local governments may benefit in the short run from gambling taxes and licensing auctions, Kindt cited academic research indicating that the benefits of gambling diminish rapidly and casinos act as a brake on regional economic activity.

"The best approach from both a social welfare and economic perspective is to recriminalize types of legalized gambling activity," Kindt concluded. As an alternative, states could set tax rates at 100 percent and pay operators a management fee for running a casino. This approach has been used since 1995 at the Windsor, Ontario, casino in Canada and is being advocated by Mayor Richard M. Daley for a proposed casino in Chicago.

In Illinois, no more than 35 percent of casino revenues are returned to state and local governments, "which means that, at minimum, two-thirds of the net money lost by Illinois gamblers goes back to Las Vegas," Kindt said. "Simply put, you don’t have to expand gambling in Illinois to raise more tax money. Just raise the taxes on casinos in operation, and you’ll get revenues right away."

As a longer-range solution, Kindt advocates turning gambling facilities into educational centers. In Omaha, Neb., the ailing Aksarben Racetrack was converted into a high-tech office park with classroom facilities for the University of Nebraska.

"Instead of draining the Omaha economy via government-sanctioned casinos, Nebraska has decided to educate the public and promote high-tech entrepreneurship," Kindt wrote in an article published in the Stanford University Journal of Law, Business, and Finance.