Hard Times USA

Casinos Are Booming Thanks to State Governments' Need to Exploit Gambling Addicts for Revenue

Slot machine losses are taxes on suffering addicts to prevent states from going bust.

Photo Credit: Shutterstock.com/Monkey Business Images

Growing up, Arelia Taveras' family often traveled to Atlantic City for a fun time together in the casinos. Gambling was always portrayed as a fine form of entertainment, and so at 21, Taveras didn’t hesitate to make her way down to the Jersey Shore with her family about once a month.

More than a decade later, Taveras was visiting AC alone every weekend. As an escape from the stresses of being a lawyer, she would gamble from Friday night until Sunday, playing blackjack, poker and roulette.

Soon, the casinos brought in the comps. Limos, with her personal pillow in the trunk, took her to and from her home in New York. She was given free trips to partner casinos in the Bahamas and Las Vegas, where her friend had to fly out to bring her back home after she got lost in gambling for 21 days. She was only supposed to stay for three.

Taveras hit rock-bottom when she drained a bank account that consisted of her client’s money. A million dollars in debt, a grand larceny charge, and two and a half years in jail later, Taveras is now left trying to pick up the pieces.

Gambling is no longer an acceptable activity in her eyes. “It’s killing people. I lost my professional career. I lost my reputation. I probably wasn’t even meant to survive this.”

What Are the Odds That Casinos Hurt?

People have been gambling for thousands of years. But in recent decades, casinos in the U.S. have seen enormous growth. Long after Nevada legalized casino gambling in 1931, New Jersey legalized it in 1976. Since then, casinos have rapidly sprung up, and today there are about 900 casinos throughout 38 states nationwide.

Why such a drastic expansion?

Casinos have primarily escalated because state governments are increasingly turning to them for a source of revenue. In the past, federal officials often publicly acknowledged the harms of gambling. For instance, during the Great Depression, New York City Mayor Fiorello La Guardia dumped slot machines into the Long Island Sound and shamed those who attempted to prey on his residents during financial hardship.

Today, however, state governments work with casino managers in the name of revenue, which they justify by allotting the money to projects that are meant to enhance communities. In reality, however, governments’ partnership with casinos ultimately harms communities. Unlike other “sin taxes,” like those on tobacco, alcohol and, in the near future, possibly soda, which act to discourage destructive behavior, casino taxes are collected with the government’s encouragement, through partnership and advertising.

Now, with casinos closer to peoples’ homes, more Americans are able to go to casinos and can go more often. In 2011, the manager at a Pennsylvania casino was quoted saying that his customers visited an average of 4.5 days a week.

And with more gamblers comes more gambling addicts. The National Council on Problem Gambling states that in the U.S., an estimated 2 million adults are pathological gamblers, while about 4-6 million are problem gamblers, who meet certain criteria including chasing losses, irritability when attempting to stop gambling, etc. And problem gamblers don’t just lose all their money — consequences are severe. One out of every five problem gamblers attempts suicide.

Meanwhile, casinos make about 90 percent of their profits from problem gamblers, which make up 10 percent of their customers. Though state governments claim that casino tax is a “voluntary tax,” it’s clear that the majority of the revenue is essentially comes from an addict tax.

As casino owners and state governments create and then exploit addicts, they prey on people’s weaknesses, many of which are constructed by societal and economic structures. For one, they prey on people who are desperate for some extra cash. A survey done by the Consumer Federation of America found that one out of five Americans thinks the best way to achieve long-term financial security is to play the lottery. And while casinos are a different form of gambling, people who gamble may have similar high hopes.

Today, gamblers are losing money more than ever.  In 2007, Americans lost more than $92 billion gambling — nine times the amount they lost in 1982. Though the American Gambling Association, a top lobbying casino group, states the median income of a casino gambler is around $50,000, Les Bernal cautions that casinos fund the association, and thus their research. Bernal is the national director of Stop Predatory Gambling, a non-profit that works to get the government out of the gambling business. He said he’s never seen good data on gambler incomes, however, he believes that as most of the casinos nationwide are located in small towns, the majority of casino gamblers are now working-class people, not high rollers who made up the majority in the past.

In California, for example, journalists exposed that welfare recipients used their welfare debit cards to withdraw $1.8 million in the span of eight months. And in Pennsylvania, a survey found that 48 percent of those below the poverty line planned to gamble at a newly built casino.

But perhaps more than preying on people’s hopes of winning, casino gambling also preys on the lonely, the stressed and the bored to make a profit. Research shows that for hardcore addicts, gambling isn’t about winning, but rather the entering of a trancelike state. Taveras said, “I never won enough to excite me or lost enough to depress me.” She said that gambling was a huge escape from both the pressure and repetitiveness of everyday life. “I would probably still be gambling if I could. I loved it. I didn’t have a child. I didn’t have a boyfriend.”

For many, the element of risk associated with gambling is a huge enticement, as some people feel they have to scare themselves into feeling alive. Taking risks also allows people to momentarily feel as if they have some control over their lives.

But whatever it is that drives people to gamble should not be preyed upon in the name of a revenue source, especially when almost all of this revenue is generated from problem gamblers.

So why do state governments turn to taxation by exploitation?

Desperation, Bernal says. “We live in a society where people want quick solutions. We’re in desperate times.”

High Stakes and Desperate Measures

Casino managers take drastic actions to make sure problem gamblers keep coming back and losing money, in order to ensure their profits. From supplying losing gamblers with small cash vouchers as incentives to compensating their rooms, limo rides and casino vacation packages. But the government also employs desperate measures to entice casino customers.

Most commercial casinos are exempted from some of the states’ laws, such as smoking laws and dram shop laws that require bartenders to stop serving patrons if they believe they have had too much alcohol. In addition, the law doesn’t permit just anyone to open up a casino, as casinos are given regional monopolies by the state. Casinos are also allowed to lend money, even to people who are drunk. Gamblers can sign up for loans known as “markers,” which are interest-free and usually presented to players who lost big and want to win it all back.

But besides turning a blind eye to the state laws, the government also turns a blind eye to the harm casinos cause, instead of regulating them to prevent addiction. 

For example, casino ATMs across the nation are largely owned by Global Cash Access, which creates sophisticated ATMs that are permitted to bypass people’s takeout limit and gather their information. GCA then sells the users’ names back to the casinos. Because people who use casino ATMs tend to be problem gamblers and have the propensity to chase their losses, Bernal said, “you might as well put a neon bull’s-eye on your back.”

As for the games themselves, Bernal said, “The government openly acknowledges slot machines are going to addict and hurt people.”

In fact, slot machines are created to exploit human psychology, allowing players to enter the trancelike state and therefore play faster and play until they lose any earnings. Natasha Schüll, author of Addiction by Design, wrote in The Washington Post,“Every feature of a slot machine -- its mathematical structure, visual graphics, sound dynamics, seating and screen ergonomics -- is calibrated to increase … playing until all your money is gone.” Even the stools at slot machines have been designed to avoid cutting off leg circulation, and levers have been replaced with buttons for quicker and easier play.

Consequently, slot machines account for about 70 percent of casino revenues. And though government gaming boards do regulate the machines to make sure they are secure and their software is running properly, they do not regulate to protect against player addiction. Players are not informed of their odds of winning, and they are unrestricted to bet as much, as fast and as frequent as they desire.

Hitting the Jackpot is Merely Beginners’ Luck

While state governments actively ignore casinos’ harmful consequences, they work to enthusiastically promote casino gambling through advertising campaigns and various other forms of support. For example, New Jersey has increased support to its Atlantic City casinos while decreasing other social services.Governor Chris Christie promised $260 million in tax breaks on a new AC casino named Revel, which went bankrupt, all while making tax cuts for the wealthy, tax breaks for corporations, cuts to education and cuts to women’s health.

States justify their support for casino gambling in the name of tax revenue, which often goes to funds that attempt to enhance public services. The revenue from taxing casinos in Atlantic City, for instance, gets used on services for the elderly and disabled – including, not so ironically, services that offer them free transportation to and from casinos.

Often, however, this revenue can’t even keep up with the services it’s supposed to fund.

For example, the revenue from AC casinos has not been enough to meet the increasing demands of the disabled and elderly. In the NJ Casino Revenue Fund Advisory Commission report for 2011, the commission stated that they continue to push for adequately funded programs to “correct serious inequities in the allocation of several programs that have not received funding increases nor cost of living increases from the Casino Revenue Funds for over a decade and are not equipped to meet the demand for services resulting from a growing elderly population.”

Lucy Dadayan is senior policy analyst at the Rockefeller Institute of Government, a public policy research center, which conducts research on state and local governments. Throughout her years of studying gambling revenue and its effect on state governments, she said she has found that taxes on casinos don’t make for a dependable revenue source, especially for increasing costs of social programs. After studying a 10-year trend on casino revenue, Dadayan found an overall decline of the year-over-year growth rate.

Dadayan said, “All the research results indicate that the pace of growth of tax revenue generated from gambling does not really keep pace with the growth of the services which are financed by the gambling revenue.”

As casinos continue to pop up across states throughout the nation, it becomes unrealistic for those who want to gamble to go out-of-state and travel further than necessary to get to a casino. As a result, states like New Jersey and Nevada have seen tremendous decline in revenue growth from casinos, as its past customers now live near a closer casino. Pennsylvania, on the other hand, has seen a huge spike in revenue growth as casinos have been newly built around the state.

Yet, Dadayan said the new hike in revenue would likely be temporary as casinos around the country are built.

“The growth rate [for casino revenue] is high in the beginning but such growth is only short-term,” Dadayan said. “In the long run, we see a slow down in the growth.”

Government’s Go All-In For the Rescue, Despite Consequences

As a result, state governments look for new ways to expand gambling and further exploit people to bring in more revenue. Governor Christie just recently passed a law legalizing online casinos, allowing Internet users in the state to make bets with a click of a mouse. Online gambling is, perhaps, the most predatory type of gambling, as users can play any game found in Atlantic City 24 hours a day, seven days a week. And two out of three Americans oppose it. New Jersey is now the third state, after Nevada and Delaware, to legalize online gambling. With a 15 percent tax on online winnings, the state estimates online betting will bring in $436 million next year for their Revenue Fund, up from the $235 it will receive this year.  

Thus, it seems as though state governments will continue to pull out all the stops, no matter how egregious, to continue to rake in the millions they receive from casino taxes. And, despite popular belief, increased availability to casino gambling increases gambling addicts. State legislatures often argue the opposite to justify more casinos or additional types of casino gambling in their state. They say people will leave the state to "gamble anyway" and that only “certain people” are addicts. But accessibility to casinos means more people try out gambling, and the more who do, the more addicts will inevitably be created by the casinos’ design.  One study in South Dakota found that when the state outlawed video slot machines for 100 days, the number of gambling addicts seeking treatment each month dropped by 93.5 percent.

Not only is the casino tax an unethical source of revenue, but it also helps advance an unhealthy economy. Bernal said that taxing casinos has failed as a revenue source because all it does is milk existing wealth and transfer it to an extremely wealthy group of people.

“You grow your economy by manufacturing new goods and services to export or sell locally … and then your sales tax revenue grows,” Bernal said.

In fact, some research has found that casino revenue comes at the expense of sales tax because money lost gambling could have gone to goods and services. Gambling also generally discourages productivity, which works to spur the economy.

Although some argue that casinos do create jobs, most casino work is low-wage work and sometimes more addicts are created than jobs. In Illinois, for example, in 2012, there were 20 percent more people on the state’s self-exclusion list than there were full and part-time jobs. Problem gamblers can sign these lists to prohibit them from entering casinos — which inevitably only prevents a fraction of addicts from gambling because most addicts can’t exhibit self-control. Thus, the actual amount of gambling addicts in Illinois is most likely way more than those employed from casinos. 

In the end, governments end up having to pay the costs of problem gambling. Studies have found that problem gamblers can cost states millions of dollars in social costs, due to increased crime, debt and job loss, as well as a decrease in personal savings.  The New Hampshire Gambling Commission, for example, reported a net loss of about $69 million after social costs were factored in. Others estimate the net loss is somewhere in the billions.

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Despite all the addicts and economic issues it assists in creating, state governments continue their predatory behavior — preying on people’s desperation, fears, stress and boredom. The government’s partnership with casinos glorifies gambling as a way to deal with these emotions while distracting them from what’s really behind these feelings. After all, most of these feelings are brought about by our societal conditions. And the more government distracts people, the less criticism and protest they face concerning these restrictive conditions. And, perhaps most egregiously, the distraction is all created by letting ordinary people play capitalist for a few hours, as they attempt to invest their wealth in hopes of gaining more. Ironically, our capitalist economy is likely a huge reason why many of these emotions are felt in the first place.

Upping the Ante on the Government’s Responsibility

Stop Predatory Gambling is currently working on gaining half a million signatures for its petition urging state governments to stop collaborating with casinos. The organization also hopes to continue sharing stories, like Arelia Taveras', to show problem gamblers that they’re not alone.

“The way real change happens … is by awakening people’s consciousness,” he said. “And when people on the streets hear it and care about it, then you see action in government.”

Bernal said he became interested in this issue when he realized how much harm predatory gambling does to society.

He said, “I think this issue is the antithesis of what the common good is. I think one of the primary purposes of the government — and we put it in the preamble of the Constitution, we thought it was so important — was to promote the general welfare of the public. So our sense of the common good … right now we’ve lost it.”

Arelia Taveras now goes to Gamblers Anonymous meetings, therapy once a week and is part of a lawyers' assistance program, where she is working on getting her license back. She is also working on opening up a treatment facility in New York, based on the one she attended in Minnesota, which is one of the few residential programs for problem gamblers in the nation. She also helps Stop Predatory Gambling by continuing to share her story, because, she said, so many gambling addicts feel like it’s their fault. Instead, she believes this addiction needs to be looked at as a real problem.

After everything she’s been through, Taveras said she will continue to fight the stigma against gambling addicts and push for change.

She said, “All this drama. All this sadness … I cried rivers in jail. I don’t believe that pain was for nothing. … If I don’t do anything about it, what would all this pain have been for?”

Alyssa Figueroa is an associate editor at AlterNet.