The pro and con sides to both California bills dealing with Indian gaming this November have raised well over $3 million since mid-August. Voters should prepare for the barrage of ads that is only now beginning. Unfortunately, the group that could benefit most from reforms will not be heard from since they have been ignored in both billsthe gaming consumer.
Proposition 68 requires Indian casinos to pay 25 percent of their net winnings from slot machines to the state. If they refuse, non-Indian card clubs and racetracks will be allowed to compete by operating 30,000 slot machines. Proposition 70 would require tribes to pay the standard California corporate tax rate of about 8.8 percent in exchange for allowing tribes to exceed the 2,000-slot-machine-per-tribe cap, allowing craps and roulette tables, and extending tribes gambling agreements with the state to 99 years.
Businesses exist to serve their consumers. Gambling is no exception. Many Californians are more than willing to bet against the odds in order to enjoy the pleasure of playing and the potential thrill of winning. Businesses would be more than happy to serve these desires if only they were allowed. Unfortunately gaming consumers cannot always gamble where they choose or place the type of bets they desire, even though there are businessmen more than willing to transact with them.
Since Indian casinos will likely decline to pay the hefty 25 percent tax, prop 68 will end up allowing more businesses to offer their services to gaming consumers. But the impact will be small. If passed, prop 68 would only allow 16 currently operating card rooms and racetracks to offer slots machines to consumers. In effect, the current gaming monopoly licenses would simply be expanded from 53 gambling tribes to also include 16 non-Indian establishments.
Prop 70 benefits gaming consumers because it would allow Indian casinos to offer more slots and two new table games. Unfortunately it would prevent any new entrepreneurs from offering their services to gaming consumers by preserving tribes current monopoly privileges for the next 99 years. When governments grant monopoly privileges to businesses, innovation slows, and consumers face higher prices.
Both of the propositions are ploys by special interest groups for government handouts. Prop 68 will benefit card rooms and racetracks, while Indian tribes, such as the Cahuilla of Palm Springs and the Redding Rancheria, have funded the campaign for prop 70. Both bills involve the state government getting a cut too. Who is being left out? The California gaming consumer.
The gambling business should not be treated any differently than other businesses in California. Consumers and businesses should be free to engage in mutually beneficial transactions whenever they want. That would mean ending grants of monopoly privilege, and allowing card rooms, racetracks, and any other entrepreneurs to offer gaming options to consumers. Who would lose from a proposition for free enterprise in gaming? The special interests that are protected from competition by the state of California and the politicians who get to hand out the favors. That sounds like a good bet for California consumers and our economy.
Benjamin Powell is a Senior Fellow at The Independent Institute, Director of the Free Market Institute at Texas Tech University, and former President of the Association of Private Enterprise Education. Dr. Powell received his Ph.D. in economics from George Mason University. He has been assistant professor of economics at San Jose State University, a fellow with the Mercatus Center's Global Prosperity Initiative, and a visiting research fellow with the American Institute for Economic Research. Benjamin is also the editor of Housing America: Building out of Crisis.
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