Matthew Hancock

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Casinos in New Hampshire, a Failure of Democracy
In this article in the Conway Daily Sun I was struck by Governor Hassan's response to a question on whether to create a new tax plan rather than depend on gambling revenue.

"I don't want to be at the mercy of Maine and Massachusetts as they open casinos, I would much rather seize the moment."

Relying on tax revenue from a casino in New Hampshire precisely puts us at the mercy of Maine and Massachusetts. As casinos pop up around us, we're less likely to attract tourists to the state solely from gambling. One potential is that it will create pressure for additional casinos in New Hampshire to siphon people across the border to closer casinos than those in their own state. The second is that the revenue generated from casinos is going to be largely generated from New Hampshire residents. This revenue will not be allocated efficiently from an economic growth standpoint, as despite the casino being described as "high-end" the tax distribution is likely to be regressive.

"We have an economy structured around not having an income or sales tax and I think that economy has worked well for us."

First, arguing the main basis of the status quo is OK while calling for innovation and economic growth is a little ironic. However, this is our fault as a citizenry. This suboptimal policy is of our own making. We force politicians to sign pledges saying they won't implement new taxes. We want lower taxes while maintaining (or expanding) public services. In fact, expanding services is essential to economic growth. Our state has bridges and roads in disrepair, schools that need more funding, health and mental services that were cut by the previous congress, and an underfunded University system (one of the line items Governor Hassan mentioned) that is critical to our state's future economic growth. Spending on these projects is critical to the future prosperity and competitiveness of our state, but no one is willing to spend money on them. The ROI on these investments is greater than from having lower taxes, but that doesn't seem to matter. Strategic spending would create more wealth for us collectively, but the pressure is on short-sighted easy fixes that impact "others."

We will likely never generate the revenue needed solely from a casino. From a bargaining standpoint one casino owned by a private business has tremendous bargaining power over the state. Despite being "highly regulated" the casino has the upper hand by being an important source of revenue. They'll start lobbying saying their taxes will need to be lowered to remain competitive with casinos in other states. They may even threaten closure to get their way. There is also huge potential for regulatory capture.

One principle I've always believed is that the role of government isn't to protect people from themselves. This rule is generally easy to apply, but gambling is a more difficult case to reconcile. People should understand the risks and accept they will lose money and gambling is really more for entertainment. However, in many cases when people are struggling, gambling seems like the only option for a windfall in cash (or any cash). Every time I've been in a line at a gas station behind people buying scratch cards it's clear that they need to win and that they shouldn't really be wasting money on them. The economic incentives are such that it takes advantage of people. Highly regulated or not, it creates a situation that those that can least afford it are most likely to lose money. Additionally, the externalities of a casino are likely to fall on taxpayers in one way or another. I'm glad to see Governor Hassan specifically mention that revenue from the casino will be set aside for substance and gambling addiction programs. With casinos further away their impacts haven't been seen much here, but I think there is reason for concern about the potential damages to families when the casino is a short drive away. People that don't have enough to get by shouldn't be put in a situation where their only option is gambling. The odds of winning or losing in a lottery are relatively easy to comprehend and have low costs of entry, but games in casinos are more likely to give the illusion that they are predictable and can be beat.

I can't blame Governor Hassan for pursuing this suboptimal policy. The electorate has spoken and has given her few options to work with. This is a failure of democracy, not of our elected officials. I really hope the social costs to the state are minimal and that the revenue is stable and allows our state to make the critical investments to remain competitive and boost economic growth. However, I have real doubts that this is the likely outcome.

The bottom line is that New Hampshire is one of the best places to live in the country and we should be willing to pay what it costs to not just keep it that way, but to improve the state. Taxes are treated as a black hole where money goes but we get nothing in return. The truth of the matter is that the state is great because of the taxes we pay, not despite them. To achieve economic growth and remain competitive, our focus should be on determining the most efficient and beneficial tax policies possible – instead of trying to find the easiest ways to shirk our obligation to ourselves and our future.