The gambling lobby obsessively pushes expansion, and their only real argument in the revenue it will provide. But even that is a scam, and for reasons you have probably never heard before. Suffice it to say, if you have heard the figure “$3 billion” and assumed that was the amount the legislature would have if gambling were expanded, you’ve been had. It’s not even close.
Here’s why:
Slot machines make the lion’s share of the money in casinos, and are all the horse racing industry even wants to legalize. They are the real money maker for all of the gambling clans.
And – drum roll, please – 93 cents of every dollar spent on slots IS NOT TAXABLE.
How can this be? The explanation lies in two words that no competent legislator should be ignorant of: “Prize pool”.
“Prize pool” is why the general revenue argument is deceptive. What is a prize pool?
A prize pool is the stack of cash casinos must keep around to pay out big winners. After all, they can’t just go out and spend everything. What happens when lightening strikes and someone actually hits the jackpot?
They must have a huge amount of cash on hand, and this prize pool isn’t considered traditional revenue for casinos. It is much more like infrastructure – like cement mixers are for construction companies.
Prize pool dollars are not taxable by the state of Texas.
And how much of the money spent on slots goes into the ‘prize pool”, becoming untouchable for taxation purposes? Ninety-three cents on every dollar. Ninety-three percent – leaving only seven cents on every dollar that is actually taxable.
But, gee-golly Beav, what about the GR bonanza the gambling lobby says expanded gambling will bring? An illusion.
This is why they always talk about how much money Texans spend in Oklahoma, instead of talking about revenue to the Oklahoma legislature. If you don’t know about prize pools, you’ll naturally assume that virtually all of every dollar Texans are spending in Oklahoma will be taxable.
We keep hearing about a $3 billion spent on slot machines out of state. Let’s reasonably project a 15% tax rate for revenues on expanded gambling.
In another industry, that would mean close to $450,000,000 to GR.
The first thing to notice is that even this number doesn’t come close to justifying the level of angst the gambling lobby tries to create daily about not getting these revenues. No problem can be fixed with this kind of money, though many would be created, the chief of which is that the state of Texas would lose a huge amount of self-respect.
And, this number doesn’t even approach the damage we’d do to our state with expanded gambling with depressed productivity in the areas around casinos, law enforcement costs, and social service costs.
However, even this pathetic amount wouldn’t make it into GR.
This is because 93% of the $3 billion lost on slots would go into the prize pool, leaving only $210,000,000 of taxable revenue. Taxed at a rate of 15%, this would give the state of Texas around $32 million in new revenues. Thirty-two million. Yep.
And that is a drop in the bucket compared to the law enforcement and social services costs we would create for ourselves.
So, picture the dreams of a revenue bonanza that the gambling lobby has tried to create in your mind for lo these many years. Then, realize the kind of GR money we are really talking about.
Then, try to imagine what your parents or grandparents would think about someone who pretends to be your friend but has tried to so badly disorient you for their own monetary gain.
Then, for Texas, please remember the term “prize pool” the next time the same song and dance is trotted out.