Ballot Update 2008: Maryland Slots Not a Fix for State's Budget Problems

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Maryland is one of more than twenty states struggling with mid-year budget shortfalls as a result of a weak economy and the corresponding slump in tax collections. While this fact wasn't the original impetus for this November's ballot proposal to introduce 15,000 slot machines into the state, it has swayed some observers into supporting the measure, despite the fact that it would be years before the first slot machine lever is ever pulled.

As in Missouri, the backers of the proposal have tried to dress up slots in Maryland by linking the new revenue to education. But since no requirement exists that total education funding actually increase, there is no barrier to using revenues from the machines to simply replace revenue currently coming out of the general revenue fund. This hasn't deterred many supporters, though, as the increasingly dire situation of the Maryland budget has boosted the appeal of gaining additional government revenue (no matter how far off in the future) without raising taxes.

But taxes, particularly the income tax, have some notable advantages over gambling revenues as a means of paying for government. Though supporters of the measure have dismissed the idea of raising taxes during these tough economic times, they fail to acknowledge that gambling revenues are disproportionately collected from those less well-off individuals most harmed by the weak economy. Taxes also do not create the inevitable social ills that accompany gambling, which can end up draining a significant portion of the revenues expected from introducing slots.

Two other problems also plague the specific proposal facing Maryland. First, some question has been raised as to the accuracy of the revenue figures provided by Legislative Analysts in the state. Those estimates are unavoidably sensitive to economic conditions at the time of the introduction of slots, and to the gambling policies of other states.

Second, as Jeff Hooke of the Maryland Tax Education Foundation has pointed out, the proposal offers an unwarranted sweetheart deal to the horse raising industry, in the form of government subsidized winnings, or "purses". About $100 million of the government's portion of slot machine revenues will be dedicated to boosting racing purses. Hooke argues that this will do nothing to help Maryland's racing industry, and the majority of the money will go to out-of-state horse owners. Though this subsidy to racing purses has been reduced substantially from what was originally proposed, it is still an irresponsible use of slot machine revenues.

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