To legislators in many states, legalized gambling looks like a pretty sweet deal: Casinos are seemingly guaranteed money-makers, and state governments have an opportunity to reap a chunk of their revenue through taxation or profit-sharing agreements. Best of all, citizens volunteer to give their money to casinos. Many of them do it for fun. Few people enjoy paying their taxes, but everyone likes to play games.
For a while, that’s how things worked in Delaware. As of last year, gambling revenue was the state’s fourth-biggest revenue stream, beating out its notoriously lenient corporate taxation system. Things were going so well that the Delaware House signed off on a plan to authorize casino expansion.
But experienced gamblers know that the biggest highs often precede the worst crashes. That’s exactly what has happened in Delaware over the past few months, where the state government is now moving forward with plans to grant an $8 million bailout package to its newly broke gambling industry.
The problem for Delaware is that reaping gambling revenue is a little too sweet of a deal. After the 2008 financial collapse dried up public coffers across the nation, neighboring states like Pennsylvania and Maryland turned to casino revenue as a way raising funds without hiking taxes. In doing so, they put themselves in direct competition with Delaware casinos for the attention of gambling enthusiasts.
Slot revenue collapsed, dropping by about $47 million in five months. Dover Downs, the biggest casino in the state and one if its biggest private employers, warned of balance sheet catastrophe unless Delaware cut taxes on the industry. Taking an $8 million bailout out of the state’s $21.3 million surplus was evidently a more palatable solution.
“The administration has not supported changing the tax structure permanently, but recognizes that forcing the casinos to bear additional costs will make them less competitive at a time when they need to be more competitive with casinos in surrounding states,” a spokesperson for Democratic governor Jack Markell told CBS.
But a bailout may only delay the inevitable.
“This is applying a Band-Aid to a bullet-shot wound,” investment banker Jay Masurekar recently told Delaware Online. Even if $8 million temporarily stems the bleeding, it doesn’t address the oversupply of casinos in the mid-Atlantic states.
Oddly enough, that hasn’t stopped State Rep. Dennis Williams, a Democrat, from proposing a law that would add more casinos to the country’s second-smallest state. The bill awaits consideration by the General Assembly’s gaming committee.
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Ned Resnikoff is an urban policy analyst, researcher, writer, and editor. His byline has appeared in a variety of publications, including the New York Times, San Francisco Chronicle, Dissent, and The Nation. He writes the newsletter Public Comment, which can be found at publiccomment.blog.