10/27/2009

The Hidden Costs of Expanded Gambling

Proponents of casinos often talk about “all the revenue casinos could bring Massachusetts.” What they fail to do is subtract from those revenue numbers the enormous, hidden costs to government and taxpayers. That’s why Connecticut and New Jersey have higher taxes and worse fiscal problems than Massachusetts.

The Costs of Crime

When casinos come to town, crime goes up. Crime, including embezzlement, robbery, DUIs, aggravated assaults and domestic violence rates, increases 8 – 10% right after casino is built, and continues to increase after that — and local communities have to pick up the tab.[1] Local governments also bear the costs of significant increases in emergency service calls and casino-related traffic problems requiring police oversight.[2]

The Costs of Regulation

Creating a whole new bureaucracy isn’t cheap. A brand new government bureaucracy will be necessary to audit, regulate, inspect and oversee casinos – to the tune of $20 million, or higher.[3] Hundreds of government employees will be necessary to ensure compliance with regulations regarding money laundering, wiretapping and loan sharking.[4]

The Costs of Problem Gambling

Problem gamblers are expensive. Due to the predatory, addictive nature of the new slots, Massachusetts can expect a 50% increase in the number of problem gamblers in Massachusetts if we expanded gambling in the state. [5] According to the California Attorney General’s office, problem and pathological gamblers cost California $1 billion per year, [6] while officials in Indiana, after an exhaustive review, estimated the cost of serving each problem gambler at $2,500 per year[7].  This would add up to well over $750 million in costs for Massachusetts.[8] Even half of that number would be an enormous fiscal burden to add to the already dwindling appropriations for the Commonwealth’s mental health and substance abuse services.

The Costs of Missed Opportunities

There are more effective ways we could be spending our money. Top economists, including a Nobel Prize winner[9], agree — money spent in casinos does not have nearly as much of a positive effect on the rest of the economy as spending and investment in other industries. That’s why the most pro-businesses papers, including the Boston Business Journal and the Wall Street Journal, oppose casinos.


[1] Grinols, Earl L., Mustard, David B. and Dilley, Cynthia Hunt, “Casinos, Crime and Community Costs.” June 2000.

[2] Baxandall, Phineas and Bruce Sacerdote. “Betting on the Future: The Economic Impact of Legalized Gambling. ” Rappaport Institute for Greater Boston, Dartmouth College. Policy Briefs, January 13, 2005

[3] Based on budget figures from other states with casino gambling (NY, IL, PA, NJ).

[4] Testimony of Attorney General Martha Coakley. Senate Information Hearing on Gambling. June 29, 2009.

[5] National Gambling Impact Study Commission. 1999.

[6] Simmons, Charlene Wear, Ph.D: “Gambling in the Golden State 1998 Forward”. Requested by Attorney General Lockyear, 2006.

[7] Spectrum Gaming Group, “Comprehensive Analysis: Projecting and Preparing for Potential Impact of Expanded Gaming on Commonwealth of Massachusetts.”, p. 27.  August 1, 2008.

[8] Assuming 300,000 problem gamblers. Utilizing proposed casino locations (3) and extending a 50 mile radius around each, this area includes 319 cities and towns (approximately 6,327,100 people or 97% of the population).  If you accept that 5% in the 50 mile radius will be problem gamblers, this totals 316,355 residents. (6,327,100 x .05 = 316,355)

[9] Paul Samuelson, Economics 245 (10th ed, 1976).

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