Why not to build a casino; Or, “That’s where the money is”

Whether Toronto will get a casino has been a hot topic lately. Over the past month, our councillor, Frances Nunziata, like all members of council, has been extensively lobbied by gambling associations looking to build a casino downtown. Ms Nunziata does not have a stated position on a casino, but she is being lobbied by some powerful groups, including

  • Rock Gaming
  • MGM
  • Woodbine
  • Caesars
  • Sutherland and Associates
  • Sussex Strategy Group

Faced with such powerful opposition, your humble correspondent does not stand a chance. Nonetheless…

Keep Willie Sutton in mind

When Willie Sutton, a bank robber, was asked why he robbed banks, he responded “Because that’s where the money is.” Torontonians should keep Sutton in mind when they consider the casinos being proposed. A casino is supposed to bring jobs and tax revenue for the city, but it won’t. We’re really considering a casino so that we can get all the money in one place—and then take some of it.

Why a casino won’t create jobs

The pro-casino lobby says that a casino will generate jobs in Toronto. I can’t see how this will be—and I know a little bit about economics. A casino will generate casino jobs, yes—but it will do so while it destroys other ones.

This is for one simple reason: Every cent spent at the casino must have come from somewhere else in the economy. Unlike money spent at school, or on a highway, or saved in investments, casino money is gone. The services, once consumed, leave us no better off at the end. This, of course, is not a bad thing; we can’t all invest all the money all the time. But there is no point pretending that a casino is an investment or that it will make us more productive.

Where would the money come from? Unless it comes from savings, it must come from some other spending. Instead of buying a new car every 8 years, you might choose to gamble and buy a new car every 8.5 years. Those forgone car payments would go to the casino instead of the car company. And, therefore, there will be fewer autoworkers and more casino workers. Perhaps you will buy cheaper groceries. Perhaps you will go out to the movies less; it doesn’t really matter as long as the principle is clear: Casinos are not job creators. Casinos are job shifters.

Not all money is spent like this, of course. When you buy a new iPhone, you become more productive. You can browse while you talk to your children, or text while you weave all over the road (autoworkers win again!). iPhones let you make more with less—they are an investment. Infrastructure spending is like this too; more buses mean we have more time in the day. We get more done, so we get ever-so-slightly-yet-genuinely wealthier. This is good spending.

A casino, though? Dirty, sexy fun, yes–but just not an investment. A casino does not make us more productive, and therefore it does not make us genuinely better off—with one possible exception. Toronto could get jobs if it were to take money (and jobs) from someone outside of Toronto. Casino Windsor, for instance, makes a ton of sense (for Canadians) because it takes money that would have otherwise been spent in the States. Casino Niagara beggars Buffalo. And Casinorama—well, it beggars old white people. But Toronto is not so geographically gifted; it is not near a border. We would be taking jobs from other non-casino enterprises in Toronto, or, at best, from the cities surrounding us. Taking money from other Ontarians is a much less attractive proposition than robbing our southern neighbours blind: I have no less loyalty to Ontario than to Toronto.

Taxes

Wily Willy Sutton would have drooled at the prospect of a casino. A casino has tons of money! Think how much of it we can take! This is the sort of thinking that gets people all worked up. Alas, neither bank robbery nor politician-endorsed casino stickups make for good tax policy.

The taxes raised at the casino will, in the end, come from the gamblers as yet another sin tax. I’m a sinner, and I’m fine with sin taxes; they discourage undesirable activities. Smokers should pay enough to discourage smoking; gas should be taxed enough to discourage driving. Both smoking and driving create ‘externalities’—when the consumer sticks someone else with the bill.

But we wouldn’t be building a casino so that we could discourage gambling—because that would be insane, like building a whorehouse to discourage whoring. No, we would be building a casino for the sole purpose of taxing it, and that’s a whole different matter altogether, from both a moral and economic perspective. From a moral perspective, we’d be filthy: the government would be saying that an activity is wrong and should be forbidden or pushed to the margins (Niagara, Windsor, Rama)… unless, you know… the price is right. From an economic perspective, it’s every bit as bad: we’d be asking a large American company to give us our taste as money from our dopiest citizens gets taken straight out of the country. We have hitherto disallowed casinos until now on moral grounds. If we change our minds, we should change them on moral grounds too, not economic ones.

And, besides, I think we can do better—by taxing those things we dislike, like, say, gas. I think we should not tax stupidity or cupidity because, although we have too much of them, a tax is unlikely to correct the surplus. We should tax things that are bad and that we have a chance of changing–things that are ‘elastic’, as economists say.

And what of that? Can you imagine City Council taxing gasoline? It would never happen, because a gas tax would be seen as a tax on regular working-folk doing regular working-day things, like driving. And so? That, to me, is precisely the reason we should have one. Driving is hard on city life. We should all drive less—and a gas tax would make us. It would put a price on our actions. Further, the wealthy would pay more. The poor would pay less. Commuters (of whom we have too many) would pay more; downtowners would pay less. Transit riders would pay nothing; 905ers would pay more. Gas is already too expensive, you say? I’d argue that it isn’t, since global temperatures keep rising, but fine—put up tolls. Or tax parking. That’s a war on the car? Tax condos. We have enough. Or tax urban sprawl, income inequality, pollution, or—gasp—property.

Tax the things we want to change and can change. Don’t tax things just because the money is there. Willy Sutton would do that–and he was a crook.

 

¹In this post, I make a number of assumptions that seem, to me, fairly reasonable. I assume that the productivity of labour is the same among all industries–even though I suspect the productivity of labour in a casino is much higher than in Ontario as a whole. I also assume that the multiplier is the same among all industries, even though I doubt it is. I think the multiplier in casinos is likely much lower. I assume the velocity of money will not change. I think in all the assumptions that I’m erring on the side of caution.

 

Author: Adam Norman

I am raising my two children in Weston.

2 thoughts on “Why not to build a casino; Or, “That’s where the money is””

  1. This is an excellent analysis of the issues involved in establishing a casino, on the perils of allowing deep-pockets to lobby our councillors (just because it’s not new doesn’t mean it should be happening), but I know from the experience of the city and the surrounding neighbourhood to the casino in Windsor that all the jobs and services inside the casino spell death to businesses in the area: the casino is a closed world and food is cheap and everything takes place under the star-light darkness of the casino ceiling and the city loses.

    Also, patrons exiting the casino are seldom in neutral: they’re either flying high from winning or desperate to replace the money they’ve lost. Both situations do not make for neighbourly behaviour.

    Let’s for once learn from the example around us and not allow money to talk loudest to our elected representative.

  2. Just because there isn’t a raft of comments doesn’t mean all your work is unappreciated or unread.

    Thank you for all that work, and I hope Ms Nunziata reads this piece and can understand the analysis.

Comments are closed.