October 23, 2012

THE MASSIVELY expensive TV advertising brawl over Maryland’s ballot Question 7 — whether to add a sixth casino, in Prince George’s County, to the five already authorized in the state, and to supplement the existing slot machines at all of them with table games such as blackjack and roulette — has been framed as a slugfest between competing casino companies (which it is) and a fight over education funding (which it isn’t).

The real question for Marylanders is this: Having already approved five casinos in a 2008 referendum, why not agree to a modest expansion that would generate tens of millions more in annual tax revenue for the state, keep gambling proceeds from leaching into neighboring states such as West Virginia and create several thousand new jobs in the bargain?

Common sense now argues in favor of a vote for the proposed expansion.

Since Maryland embarked on slots-only casinos four years ago, three of its four neighbors — Pennsylvania, Delaware and West Virginia — have upped the ante by allowing table games at their casinos. At the biggest neighboring venue, the gargantuan Hollywood casino in Charles Town, W.Va., at least a third of the customers come from Maryland.

Whether or not gambling appeals to you, that’s the economic and competitive reality. It also explains why Hollywood’s owner, Penn National Gaming, has deluged the airwaves in Maryland with almost $25 million in TV ads opposing the referendum. Penn doesn’t want the competition, or the substantial loss of profits, from an expansion of gambling in Maryland.

We long opposed gambling in Maryland. That position was rendered moot by the 2008 referendum, when 59 percent of state voters approved the five casinos. The biggest of them, Maryland Live!, opened this spring near BWI Marshall Airport; it is on track to pay tens of millions of dollars in state taxes this year. Another major casino, to be operated by Caesars Entertainment, is scheduled to open in downtown Baltimore in 2014.

The arguments against expanding gambling aren’t illegitimate, but they’re unconvincing given how the debate and the reality have evolved. It’s true that slot machines amount to a regressive tax, hurting poor people who can ill afford to play and lose. But table games — the main new element at stake in the referendum — attract more high-rollers than lunch-bucket gamblers. MGM Resorts International, the company with the inside track to build the casino in Prince George’s, says table-game minimums there would run from $25 to $100 a hand. Most low-rollers would be priced out.

It’s true that higher tax revenue from gambling, although earmarked for education, would not necessarily increase overall state education funding. Money in the state budget is fungible, and lawmakers would be free to redirect other funds away from schools to competing priorities.

However, gambling is already yielding millions in tax revenue, and it would produce more if voters approve the expansion. By the end of this decade, if the referendum is successful, the state estimates that the expansion would add $199 million annually to a budget of around $18 billion. Of that contribution, tens of millions would come from the casino in Prince George’s. Even if those projections are overstated, as some studies have argued, the contribution to Maryland’s budget would be critical in a state chronically struggling to balance its budget.

The addition of a casino in Prince George’s, probably at National Harbor, the glittery new development on the Potomac River, would also provide tax revenue to the county. Revenue there has long been constrained by a voter-approved property tax cap that politicians have dared not challenge despite tight budgets for local schools and other key programs.

County officials think an MGM casino and resort at National Harbor would favorably rebrand Prince George’s. We’re not convinced of that; it may take more to overcome the county’s recent history of corruption. But there’s no question that Prince George’s needs the cash that a casino would generate, including to help finance a new county hospital.

On its own, gambling is not an adequate economic development strategy for the state. But in addition to construction jobs, the expansion would add employment — an estimated 4,000 permanent positions at the Prince George’s casino, which would open in 2016. There also would be hundreds more at the state’s other venues. MGM, which plans to invest $800 million in Prince George’s, would build a hotel, restaurants and high-end retail stores to augment its casino.

Some opponents have argued that expanding gambling is a bad deal for Maryland since it would lower tax rates — currently the highest in the country — for existing casino operators, increasing their take relative to the state’s. But the owners’ tax rates would be lowered to compensate them for the unanticipated addition of a new competitor: the Prince George’s casino. That’s only fair in a highly regulated marketplace.

In the end, casinos are entertainment companies; they’re not wildly dissimilar from other kinds of businesses. If the state regulates the gaming industry adequately, ensuring it does not become a conduit for corruption, it’s hard to understand why it should be taxed much more heavily than other businesses.

Granted, gambling, like alcohol use, imposes social costs. Maryland law recognizes that by allotting $1.7 million in the current year, taken directly from slot-machine proceeds, to education, services and treatment focused on gambling addiction. That amount would more than double if voters authorize table games and a sixth casino.

Gambling is big business. Over the past decade, it has expanded to 22 states from 15, excluding facilities operated by Native Americans on reservations. There are now nearly 500 casinos around the country. Some 56 million Americans, about a sixth of the nation’s population, have spent money at an MGM property, including casinos, hotels, stores and restaurants. So given the budgetary benefits, why should Maryland opt out? By expanding gambling, the state would simply keep pace with a broad national trend while providing adequate and efficient regulation. A “for” vote on Question 7 does just that.