If the Maryland Public Policy Institute espouses the principles of free enterprise, limited government, and civil society, why, as an organization, are we critical of expanding gambling in Maryland? After all, casinos are private businesses, and gambling laws are government regulation—so shouldn’t we support additional competition and reduced regulation in the gambling marketplace?

In theory, yes. If we assume that casinos, with their slot machines and table games, offer a valuable entertainment service, additional competition and reduced regulation would doubtless provide us this service at a lower cost.

However, there are two problems with this argument. First, there is not widespread agreement about the nature of gambling as a socially valuable service, and thus there is not widespread agreement that as a matter of policy, we ought to be providing opportunities to gamble to as many people as possible at the lowest cost. Consider a roughly analogous marketplace—that of illegal drugs. We don’t look for opportunities to lower the cost and increase the audience for illegal drugs, because in general, we don’t believe that illegal drugs are a socially valuable good. Related to this first problem is the issue of unquantifiable social ills associated with gambling—we know that an additional casino and new table games will have some negative effects (such as pathological gambling and drawing revenue away from competing, and perhaps more socially valuable, businesses), but we don’t have an accurate picture of the nature or extent of these negative effects.

That may sound a bit paternalistic. But the second problem with the argument outlined above is less rooted in a sense of moral opprobrium or social concern. The campaign for expanding gambling in the State of Maryland is being supported by an enormous amount of misleading information, as well as convenient omissions of information when it suits supporters. The result is that it’s easy to miss the poor track record and broken promises of gambling advocates in Maryland, both in the public and private sector.

From the beginning, the state’s approach to expanding gambling was misguided. Instead of using a reverse auction to attract potential operators who would offer the state the largest amount of tax revenue, we required multi-million dollar application fees, with the result that there was virtually no contestation for any of the casino licenses—they were simply awarded to the only qualifying bidder. Creating a monopsony was hardly an effective way to ensure that the state was getting a good deal in doling out casino licenses. In the case of Allegany County, when no qualified bidders were interested in the license, we realized our legislatively mandated tax rate was incorrectly set, so we changed it.

Next, we decided that our state government—which had no experience in operating casinos—would do a better job of selecting and placing slot machines in private casinos than the casino operators themselves. So we used taxpayer money to purchase or lease over 7,000 slot machines, at an average cost of over $38,000 a machine. A few years later, we realized this didn’t make any sense, and quietly decided to require casinos to obtain their own slot machines.

The state’s 2007 estimates of the revenue to be received from slot machines (the estimates used to sell the plan to the public) ended up overstating the amount by an order of magnitude in FY 2012, and will likely do so again in FY 2013. Over the next five years, hundreds of millions of dollars in expected revenues are dedicated to subsidizing Maryland’s horse racing industry.

This year, in order to entice additional casino operators to the state, we had to reduce their tax rates once again, while at the same time increasing the income tax rate paid by Maryland citizens. Casino operators are also exempted from personal property taxes on their equipment, while every other capital-intensive business in Maryland must pay up.

Finally, perhaps all of these giveaways, sweetheart deals, and simple mismanagement could be forgiven if expanding gambling accomplished its stated goal of providing additional funding for Maryland’s schools. Sadly, as numerous commentators have indicated, there is absolutely no guarantee that gambling revenues will not simply displace general revenues for education spending. The result will likely be a level amount of spending for education, and additional general funds for new pet projects or windfall tax credits in the state.

You don’t have to take our word for it. Our colleagues over at the left-leaning Maryland Budget and Tax Policy Institute agree with us. Our two organizations rarely agree on anything; the fact that we both agree that expanded gambling, as proposed, is a bad bet for Maryland is very telling.