An economist and an expert on the gambling industry argued at a forum Wednesday that Maryland has overestimated the state?s net gain from the approval of slots and substantially underestimated its social costs.
“The people who propose this don?t really know what the costs are,” said Robert Goodman, a professor at Hampshire College and former head of the U.S. Gambling Research Institute.
Making gambling easier increases the number of problem gamblers, Goodman said, and if you calculate all the costs ? borrowed money, defaulted debts, bad checks and fraud by gamblers ? it amounts to $2,000 per problem gambler per year spread across society. Bankruptcies in communities with casinos, for instance, are 20 percent higher than in places far from gaming sites.
Increasing the number of problem gamblers by 1 percent ? an estimated 3 percent to a high of 7 percent of the population in a place such as Louisiana ? creates costs of $74 million, studies have found, he said.
Goodman and economist Robert Carpenter, an associate professor at the University of Maryland Baltimore County, which sponsored the panel discussion, both argued that money wagered on slots is being taken away from other legitimate, tax-collecting businesses.
“If people are already spending the money here,” on other kinds of entertainment or dining, Carpenter said, “we?re just moving it around.” This reallocated spending is called the “substitution effect” and leads to “an overestimate of the benefit of slots.”
Based on the substitution effect, which “could be big,” Carpenter believes slots will generate only about $400 million for the state, and that amount “is not important at this level of analysis.”
Fred Puddester, a former state budget chief who leads the pro-slots campaign, argued that the legislative analysts who have been studying various slots proposals for years have “given us a pretty decent number” based on reasonable estimates. He repeated assertions that slots revenue will solve a persistent structural deficit, and the only alternatives are further budget cuts or increased taxes.
Goodman asked Ron Wineholt, a lobbyist for the Maryland Chamber of Commerce, why his organization was supporting slots when business groups in other states opposed them.
“We think the alternatives are worse,” Wineholt said, especially higher taxes.
