To meet their revenue needs, governments often turn to gambling as a desirable alternative to raising taxes. The process is well-scripted.
First, announcements are made, often shrouded in business-speak, as if government were investing in a new manufacturing plant for the good of the economy. Then the corporate social responsibility messages kick in, telling us that new casinos will apply state-of-the-art approaches to ensure that patrons won’t be harmed. Finally, the casino is launched and information about its impact becomes buried in a cloud of fog.
Unfortunately, the questions that should concern the public, ones that assess the real value and impact of the “investment,” are never answered.
Is gambling an efficient way to generate revenue?
The short answer is no.
In Ontario, more than $6-billion is taken out of the economy and redistributed to gambling. After winnings have been paid out, Statistics Canada reports that gambling revenue in Ontario totals $4.8-billion annually. Of this, only $1.7-billion flows to government – a “turnover” rate of about 35 per cent. The 65-per-cent lion’s share goes to “beneficiaries” (the horse-racing industry and aboriginals, for example) and to operators, giving Ontario the lowest turnover rate in Canada.
Were Ontario to achieve a turnover of 51 per cent, the national average, it would realize an additional $800-million a year in revenue. Moreover, gambling is among the lowest job-creation sectors, and the jobs that result are overwhelmingly low paid and without benefits.
Where does gambling revenue come from?
Gambling is an extractive industry – it removes money from the economy and concentrates it in the pockets of beneficiaries, operators and government. Every dollar spent is taken from other consumer purchases. This means that, if the Ontario Lottery and Gaming Corp.’s projected revenue of $1.3-billion from a new casino and gambling formats represent “dollars in,” they’re offset by equal “dollars out” redirected from the economy.
Where would these dollars out have been spent otherwise? Some will be cannibalized from existing casinos and venues – Rama, Fallsview and Niagara casinos and Woodbine would be the immediate losers. The rest will come from alternate leisure/entertainment activities, as well as restaurants, retailers and other local businesses that drive Toronto’s economic engine. OLG’s projections would be valid only if new gambling revenue came from money stored under people’s beds, money that otherwise would not have been spent.
Equally disturbing is that between a third and half of revenue comes from people being harmed by gambling. That amounts to between $2-billion and $3-billion extracted from the province’s estimated 340,000 problem gamblers. These are vulnerable people, suffering from a psychiatric disorder characterized by a severely impaired ability to control their behaviour.
Why doesn’t prevention work?
Although it declares itself a leader, Ontario falls far behind global standards for the prevention of gambling harm. World leaders include the patron monitoring program in Saskatchewan and the patron monitoring/intervention model of the Netherlands’ Holland Casinos. Here at home, our slot machines are loaded with a host of design features that induce excessive play, ATMs are within steps of any game, and advertising and promotional budgets exceed half a billion dollars annually.
Equally troublesome are so-called loyalty programs that track the frequency and duration of play, as well as the amount of each bet, and the amount won or lost for each session (and cumulatively). As these numbers increase, inducements target members to bet even more. Since all gambling is loaded in favour of the casino, gamblers’ losses are guaranteed to mount the more they play. As recent freedom-of-information requests have shown, Woodbine operators stood by while individual loyalty club members played as many as 280 times a year and lost more than $700,000.
What’s the bottom line?
Gambling is the only government initiative that knowingly harms the people it’s elected to serve. Government plays all significant roles: legislator, regulator, operator, profit-taker, guardian of public health and well-being. This places it in a position of obvious conflict – what in legal circles is known as a “perverse incentive,” where the goal of generating profit is achieved at the expense of harming the public.
Harm will be the collateral damage of raising the projected $1.3-billion for government coffers. Undoubtedly, however, those unconvinced of the merits of this expansion will be labelled “anti-gambling advocates” and dismissed as opposing harmless entertainment.
Increasing taxes by $166 a taxpayer would raise the same $1.3-billion as the planned expansion without the attendant damage. Existing gambling operations, meanwhile, are leaving at least $800-million of the public’s money on the table. Were Ontario to achieve a turnover rate equal to that of Alberta, the highest in the country, additional revenue from existing gambling operations would exceed $2-billion.
Rob Simpson served as CEO of the Ontario Problem Gambling Research Centre from its inception in 2000 until 2010. He co-authored the resource document Prevention of Problem Gambling: A Comprehensive Review of the Evidence, and Identified Best Practices.