Taylor: Are casinos the answer to Texas’ fiscal troubles?

Should Texas legalize large-scale casino gambling as a revenue generator?

We start from the idea that the state of Texas will be billions of dollars in the hole as lawmakers go to work in the 2021 legislative session. The state comptroller estimated a $4.6 billion annual deficit last summer, said in November that it wouldn’t be that bad and now owes an update known officially as the biennial revenue estimate, or BRE, before Jan. 12, the first day of the legislative session.

The BRE is how we find out if state financial decisions need to be awful, terrible or merely somewhat bad.

I’ve already argued that as a partial fiscal fix, we should legalize and tax marijuana heavily.

Not because I’m a consumer, but because that’s where the world is going. It’s inevitable, and Texas would be late otherwise. With the large revenue drop last year due to COVID-19, it feels obstreperous to wait another five years and forgo billions in obvious state tax revenue. And then we’ll end up legalizing it anyway. It’s just a matter of time.

Casinos are not as obvious a slam dunk as marijuana. Sin taxes are complicated.

One the one hand, the irrational urge to lose money to Lady Luck is strong. We seek this stuff. I regularly drive past a massive bingo parlor, which even in COVID-19 times has a parking lot packed with cars most evenings. A number of my buddies are regulars at “poker clubs,” which I understand have received municipal blessing as a workaround for what is in reality legalized gambling.

The billboards on the highways I drive daily keep me updated on the ever-changing MegaMillions and Powerball jackpots. Three Native American tribes operate legal gambling operations in the state. I know nothing about dog tracks, but apparently they exist as well.

Nationwide, legalized sports betting is neck and neck with marijuana legalization to see which will cover more states faster.

That’s just the legal, taxable stuff in Texas. What is not legal will continue to happen in the shadows. That’s why my economic brain thinks we should legalize, regulate and tax sins. Make it safer, discourage it, and then raise revenue both to treat the societal damage and fund other parts of government.

While large-scale casinos can raise state revenue, they are not necessarily positive engines of economic development. Wallet Hub recently ranked Las Vegas as the most financially distressed city in the country during the COVID-19 pandemic. The study ranked cities according to factors such as household credit scores, bankruptcy and credit card accounts in distress. Las Vegas’ bottom rank makes sense, given the disproportionate impact of the pandemic on tourism and travel. But also, the city has not sufficiently diversified from its monoculture casino economy.

In a previous Wallet Hub study, pre-pandemic Atlantic City, another gambling hub, stood out as one of the lowest-ranked cities in the country in terms of personal credit scores, with an average score of 614.

Communities in which casinos operate often develop a reputation for financial distress. It’s not a difficult conceptual leap between the gambling industry and the concentrated household ruin, the result of folks becoming addicted. Am I comfortable with the idea of more financial ruin caused by gambling? No, that’s anathema to my own life mission.

Are casinos the right way to fund a state? Also no. My own preferences would begin with a state income tax, higher oil and gas extraction taxes and an estate tax. Even in a year without a budget hole, those should be enacted to properly fund state services — and also to provide property tax relief, as real property taxes are very high compared to other states.

But I know I just lost everybody’s vote with my actual stated preferences. So I’m back to thinking that casino revenues are politically plausible, even though they have bad effects. Maybe they are the least bad thing, given political reality and the state’s need for revenue.

Las Vegas Sands owner Sheldon Adelson, along with his wife, contributed a reported $4.5 million in September to the Texas affiliate of the Republican State Leadership Committee, a group working to get GOP lawmakers elected. Adelson presumably knows a state’s financial distress can provide an opening to his industry. His largesse ought to ensure at least an open mind among state leadership about large-scale casinos coming to Texas.

The Texas Tribune reported on public opinion polling, conducted on behalf of Adelson’s firm, that showed a majority of voters — 60 percent — would favor legalized casinos and would vote for them. About 90 percent said lawmakers should allow citizens to vote on the issue.

If the effect of large-scale casinos are negative for many communities and devastating to a certain number of households — I think they are both — will that be weighed in the balance against the state’s overall need to balance its books?

In other words, for a larger economic gain, are we willing to allow certain communities and households to suffer disproportionately? How you view voters’ and leaders’ answer to that specific question should give a sense for what’s possible in Texas.

I think I know the answer.

I bet Adelson and his lobbyists get what they want, sooner rather than later.

Michael Taylor is a columnist for the San Antonio Express-News and author of “The Financial Rules for New College Graduates.”

[email protected]

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