slot machine


Crain’s editorialized today against the expansion of casino gambling in Illinois. This jumped out at me:

"Studies show social ills rise in places that have casinos."

Well, that’s unexcitingly vague. I was curious what social ills they mean, and what studies show them. It turns out that one of the most in-depth looks at the subject comes from then-University of Illinois economist Earl Grinols (now of Baylor University) and co-author David Mustard: "Casinos, Crime, & Community Costs," a 2001 paper revised in 2004. Grinols went on to write a book on the subject, Gambling in America: Costs and Benefits.

Grinols and Mustard looked at county-level FBI crime data from 1977 through 1996, when the number of counties in America with casinos rose from 14 in Nevada to 180 in 29 states. Specifically violent and property crime data: aggravated assault, rape, robbery, murder, larceny, burglary, and auto theft.

And what they found is interesting: casino openings correlated with related statistically significant increases in crime, but only after a "lag" period of a couple years. Well, with the exception of murder. So there’s that.

Some of their findings:

* "For aggravated assault, only estimates for the third and subsequent year after opening are significantly above zero, and the trend rises. The estimated high occurs in the fifth year after opening, when the aggravated assault rate is 100 assaults higher per year."

* "A county that introduces a casino might expect a negligible impact in the first two years after opening, but a higher rape rate by 6.5 to 10 incidents per 100,000 population in the fourth and fifth years after opening."

* "The pattern for robbery… is similar to the patterns for aggravated assault and rape with one important exception—the increase in robbery begins immediately. In the first year there were about 35 more robberies per 100,000 people, which increases to over 60 three years after opening."

(Worth noting: even when accounting for population density, the authors found a positive correlation between casinos and crime rates.)

Among other explanations for the lag, this one was intriguing: "[C]linical research shows that problem and pathological gamblers typically take about two to four years to start gambling, become addicted, exhaust alternative resources, and eventually commit crime."

Grinols and Mustard estimate that the social ills cost $75 per adult, further estimating that a casino would have to be taxed at 47 percent of revenues to pay for the crime costs (including property loss).

Currently the top tax rate for Illinois casinos is 50 percent (unlike people, Illinois casinos pay a progressive tax), but that would change under the proposed legislation:

The biggest plum for casino operators may be the tax breaks they’d get. Beginning Jan. 1, tax rates on casino revenue would be slashed across the board but especially at the upper end. For casinos that rake in more than $350 million a year from slot machines, the top tax rate would go from 50 percent to 30 percent. Some of the rates would take an additional drop after the start of 2013.

John Kindt, a professor at the University of Illinois, argues that the casinos should be taxed at a "virtual 100 percent" rate as they are in Canada, and also provides some good background on previous casino debates in a recent Rock River Times op-ed.

It goes back a bit to what I was saying yesterday: casino gambling has a greater potential for harm, but is less regressive than lotteries; lotteries are more regressive, but don’t seem to carry the same level of risk.

Obviously, to greater and lesser degrees, governments permit the practice of vices, like drinking alcohol and going to peep shows, whether it’s in the service of freedom or a larger tax base. In some cases, the government is in the business of actually providing the vices, like the lottery. I don’t know if it’s a slope, but it is slippery terrain. Either way, it’s good to know the odds.

John Kass—well, Ameya Pawar, via Kass—takes another approach:

[A] city that acts as the ‘house’ is a city that bets against its own people," said Pawar. "And that’s a race to the bottom."

It’s basically a moral argument: gambling is a vice, and the government shouldn’t be in the business of providing vices. Granted, the government does make money off the selling of other vices, but not only does one wrong not justify another, making the government the house is categorically different.

It’s harder to argue, since it’s really about abstract morality and emotion. But that doesn’t invalidate it; it just makes it more difficult to defend.


Photograph: p22earl (CC by 2.0)