Amendment 33: Gambling With Colorado Government
by Peter Saint-Andre, September 24, 2003
There's a push on in Colorado to pass something called "Amendment 33" on this fall's ballot. This measure would amend the state constitution to grant a monopoly on video gambling to Wembley PLC (a large British gaming firm) at certain locations in Colorado, ostensibly for the purpose of increasing funding for the state government's tourism office. Amendment 33 is being advertised as a way to increase tourism (and thereby create jobs) without raising taxes. Unfortunately, we are dealing here with a case of false advertising. Let us count the ways.
Most fundamentally, the central claim made by proponents of Amendment 33 is false: namely, that the measure will painlessly generate money for the tourism industry and therefore create jobs. The last time I checked, the residents of Colorado do not have an infinite supply of money at their disposal. So those who wile away the hours at the new video gaming terminals will have less to spend on other goods and services. It's simple math: if I spend $20 or $200 on video gaming, I have $20 or $200 less to spend somewhere else. We don't know where video gamblers might have spent their money, so the pain is generally spread across the economy as a whole, but we do know that once spent, that money is gone.
But it gets worse. Amendment 33 stipulates that 39% of the revenues will go directly to Wembley PLC, who will operate the machines as a government-granted monopoly. So not all of the revenues will stay in Colorado (Wembley is a British corporation).
Furthermore, the state government will have to lease the video gambling machines or buy them at an estimated cost of $36 million. After all, it would be too much to ask for a large, profitable overseas gaming company to invest any money up front in a venture of this kind when they can palm the expense off to local taxpayers. While the state government will be paying off the cost of the machines for some time to come (I have been unable to locate an analysis that specifies a break-even point for the state), Wembley PLC will receive 39% of the revenues from day one. Sounds like a great deal for Wembley and a lousy deal for the people of Colorado.
In essence, Amendment 33 is scheme for transferring money from one set of pockets (especially the local businesses that video gamblers might otherwise frequent) directly into another, larger set of pockets (British gaming company Wembley PLC). Can you say corporate welfare? (And it couldn't happen to a nicer company: representatives of Wembley USA have been indicted in Rhode Island for making secret payments to former politicians in exchange for legislative favors.)
But Wembley is only the biggest welfare recipient in this scheme. There is another, smaller set of welfare recipients: local companies who depend heavily on tourism. We've seen them trotted out on television commercials that favor Amendment 33: whitewater rafting providers, local car rental companies, and the like (no mention yet of expensive ski areas). All of them say that times have been tough, and that Amendment 33 will help them stay afloat.
No doubt. But times have been tough for a lot of other industries, too. The tech sector in Colorado has been hit hard, and many small companies have folded, sending thousands of people out of work. Why not subsidies for technology companies? They have just as much "right" to corporate welfare as the tourism industry. Thankfully the tech sector is still entrepreneurial enough that it's not lining up at the trough for government handouts. We can say the same about most other industries in Colorado. Why should tourism be any different?
This raises a broader issue: what business does the state government have in running a tourism office in the first place? If those businesses who benefit from increased tourism, such as ski areas and excursion companies, want to encourage tourism in our fine state, let them band together for that purpose and voluntarily fund advertising campaigns that encourage people to visit Colorado. But by no means is such advocacy an appropriate function for the state government to perform, and we would do well to abolish the state tourism office as soon as possible.
Finally, there is the indignity of proposing a constitutional amendment to pass such rubbish. Have the citizens of Colorado lost all decency and respect for our form of government? Why in the world would we amend the founding and guiding document of our republican state in order to enshrine the principle of corporate welfare?
It's been said that state-sponsored gambling is a tax on those who don't understand probability theory. But Amendment 33 gambles with something much more important than a few dollars: it gambles with the very sanctity of our laws and our constitution. And that's a tax no one should be willing to pay.