Cornerstone Statement on the Economic and Tax Distortions Associated With HB 593

Proponents of the current gambling bill (HB 593) seek to broaden support by using some of the new gambling revenue to offset existing business taxes such as the Business Enterprise Tax and Business Profits Tax.

However, this is bad tax policy because gambling revenue is more volatile than the taxes it would lower.  For instance, gambling spending is completely discretionary which means consumers will cut this type of spending first when the economy falters.  Also, gambling will be geographically limited to a few areas of the state making it susceptible, for example, to rising gas prices which discourage travel.

The Tax Foundation has reached similar conclusions:

. .  .state-run slot machines, whether overseen by the lottery agency or another agency, would present all the problems of state-run lotteries, including volatility as a revenue source.  The state lottery is a poorly designed implicit tax, paid disproportionately by the poor, and slot machines would simply exacerbate the tax policy problems created by the lottery. [emphasis added]

The goal of any good tax reform plan is to broaden the tax base (on consumption) while lowering the tax rate.  The gambling tax would do the opposite by having a very narrow tax base (just 4 casinos) and very high tax rates (40 percent) . . . call it the “anti-tax reform plan.”

Additionally, New Hampshire policymakers should take note of the poor state of casinos in neighboring states before jumping into an overly-saturated gambling market that would bring more problems than benefits.

For example, Maine recently expanded gambling, but now the Portland Press Herald is questioning that decision.  Here is a poignant clip from the story:

As a story in the New York Times Magazine last week noted, the pool of potential gamblers is both finite and collectively nearing, if not exceeding, retirement age. Saying that “anyone who has ever wanted to try a casino has tried a casino,” one industry analyst from Los Angeles told the Times that market saturation has already been reached in areas where casinos are competing.

“There are no new customers out there,” Michael Mezcka said.

His comments were part of a longer analysis detailing why the largest casino in the Western Hemisphere, Foxwoods in Ledyard, Conn., is $2.3 billion in debt and facing significant pressure from “multiple levels of creditors” to get back on a sound fiscal footing . . .

Still, as the examples of Foxwoods and the Atlantic City casinos show, these operations can no longer be considered printing presses for money no matter where they are put.

How long will it be before New Hampshire is subsidizing these casinos because the state government has become addicted to the gambling revenue?  If Foxwoods is struggling—with all of its advantages such as size, agglomeration with Mohegan Sun, and closer geographic proximity to urban areas—how long will New Hampshire’s casinos last without state aid?

At the same time, the economic costs associated with gambling — such as crime, additional law enforcement costs, gambling addiction treatment costs, lost worker productivity — are staggering, often far exceeding a state or community’s total revenues from gambling.  The social costs are just as staggering with authorities in gambling districts reporting dramatic increases in divorce, suicide, bankruptcy, child abuse and domestic violence related to gambling.

Finally, gambling hurts existing businesses by siphoning away discretionary dollars that would have been spent at local, mom-and-pop shops and will destroy New Hampshire’s “family-friendly” brand.  Our New Hampshire restaurants and hotels have earned their business in our state by refining their offerings to customers and adapting to their communities over time.  If HB 593 passes, legislators will have revealed their preference for granting monopolies to out-of-state businesses at the expense of their responsibility to ensure a favorable business climate for existing New Hampshire businesses.

Policymakers who desire to support the principles of limited government will vote no on this bill which values monopolies over existing businesses, distorts the tax system and ushers in a host of social costs that will inevitably burden Health and Human Services and town welfare departments.  Voters are unlikely be kind to legislators in November who vote in favor of allowing casinos to blemish the family-friendly environment of the Granite State.




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