Slots A Bad Gamble For Business Economy And Government
Written by Michael Lewis on July 12, 2007
By Michael Lewis
At lunch on Brickell with a bank president, the next table made us cringe. Seven gruff, muscular men were listening to a more senior associate tell them how to do business here.
The business was to bring big-time gambling to Miami-Dade.
That’s the last thing Miami needs, the bank president noted. And, with a glance at the next table, he talked about gambling attracting the wrong people.
Clear as that was to both of us, it’s invisible to our county commission, which on Tuesday placed on January’s ballot a proposal to bring slot machines to three Miami-Dade pari-mutuel facilities as the next escalation of gambling here.
Commissioner Rebeca Sosa, who backed slot-machine gambling in a failed 2005 initiative, says the county’s cut from slot revenues would help replace property taxes the Legislature cut back in June. Ironically, on the same January ballot that would permit slots is a measure to further trim property taxation.
Further gambling encroachment is odious to many. Some reject it as immoral.
Others realize that institutionalized gambling undercuts the community, creating a parallel social structure whose methods differ from the kind we now have. I wouldn’t want the eight men at the next lunch table to move here, and I wouldn’t want the kind of morality that risqué TV ads for Las Vegas hint at, "What happens here stays here."
But gambling also loses based on a non-judgmental yardstick: economics. Adding slot machines is just bad for business and for our county’s economy.
Broward County’s slots, approved in 2005 when Miami-Dade rejected them, are on pace to yield $66 million in taxes this year, to be split among schools statewide and local and county governments. In Miami-Dade, tax revenues would be smaller because our three pari-mutuels would compete with four in Broward, where revenues would decline with new competition.
So county government’s share here might hit $15 million a year if $1 billion pours into local slots.
That’s a pittance as a tax-replacement program for a county that’s going to lose $327 million in property taxes next year in state-ordered cuts, but $1 billion is more than plenty to attract the eight guys at the next table.
Just the added county costs in policing and social-services spending to help addicted gamblers and their families could eat up that $15 million.
Who would the gamblers be? Slots at dog and horse tracks and jai-alai frontons that attract local workers and retirees don’t appeal to high-roller tourists who could indulge gambling desires at what are, frankly, fancier places. So the bettors whose rent money goes down the slot are going to be locals.
These people will simply be shifting money from other forms of entertainment — sporting events, movies, dining — or from savings or real needs. The money spent on gambling will not be spent for back-to-school clothing for the kids or car payments or any of life’s necessities. There’s no more money, just shifted spending.
Proof surfaced last week in a most appropriate place, the gambling world itself. When the Seminole casinos in Broward suddenly allowed poker pots that eclipsed $100,000 each, poker tables at the pari-mutuels emptied out. "It was five days of hell," one pari-mutuel operator was quoted. "It hurt business terribly."
Gambling, to repeat, shifts spending from one place to another.
So dropping $1 billion in slots would simply slash $1 billion from other expenditures here, cutting sales taxes $70 million. And our legitimate businesspeople would be saying the same thing: "It hurt business terribly."
But why should the county seek only 1.5% to 2% of machines’ take, as proposed, and leave the vast majority of profits to owners of just three businesses, the only true beneficiaries? That’s a highly inefficient revenue tactic. Instead, government should find ways of raising funds that don’t let the majority fall into other hands.
Slots proponents note that schools, too, would share profits. True, but the funds would be sent to schools around the state. Maybe that’s why Florida voters in 2004 were so willing to allow slots just in Broward and Miami-Dade: We alone feel the pains of gambling, but they share the proceeds. Again, highly inefficient taxation.
The economics of slot machines are so bad that you’d think both government and business would erect a wall to keep them out. Government would have to add services and lose net revenues with new school-tax monies actually flowing out of the county. Business would lose revenues with no added visitors to pump them back up.
Yet even though the economic facts are decisive, only a handful of local leaders spoke out to oppose slots in the 2005 vote. Today, even fewer are talking, our chambers of commerce avoid the issue and the daily press is editorially silent.
Maybe those eight guys at the next table already have more clout than we’d like.