As Atlantic Canada slowly begins to emerge from its COVID-19 shutdown, economic recovery is sure to be high on policymakers’ agendas.
With household finances ravaged by business closures and widespread layoffs, governments are rightly working hard to help people get back on their feet — especially those who were already struggling to make ends meet before the pandemic hit.
Beneath the surface and before the pandemic hit, however, governments had been using the gambling industry to empty the pockets of these same citizens who most need their help.
And if nothing changes before the casinos reopen, they’ll do so again.
In the new Cardus brief, Royally Flushed: Reforming gambling to work for, not against, Atlantic Canada, we show that the Atlantic provinces’ gambling scheme acts as a regressive tax on those least able to pay.
The governments of New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island collect millions of dollars from the Atlantic Lottery Corporation (ALC) and local casinos. This money is piped directly into the treasuries’ general revenues.
While lottery and casino money is indistinguishable from legitimate taxes in how it’s spent, there are significant — and unjust — differences in the sources of gambling money.
Gambling is highly regressive. The poorest 20 per cent of Atlantic households see an estimated four per cent of their incomes taxed away by gambling.
That’s twice as much as what the wealthiest 20 per cent lose by gambling — even though the wealthiest make 5.8 times as much as the poorest and pay almost 10 times more in income taxes.
Government-run gambling preys not only on the poor, but also on the addicted. Problem gamblers provide up to 30 per cent of gambling revenue despite making up only one or two per cent of the population.
Atlantic provinces have made the most addictive forms of gambling — slot machines and video lottery terminals (VLTs )— among the easiest to access, with VLTs available in bars all along the East Coast. According to one study, someone who played VLTs in the previous year was 38 times more likely to have a significant gambling problem than someone who hadn’t touched a VLT.
This figure should come as no surprise. Slots and VLTs are known for their addictive design, relying on features that undermine players’ rational perceptions of the game to maximize time on device (and, of course, maximize spending).
Over the past four years, at least 60 per cent of Atlantic provinces’ net gambling revenue has come from slots and VLTs.
Given that almost a third of Atlantic Canada’s gambling revenue comes from problem gamblers, and more than half of gambling funds are generated by machines designed to override players’ individual wills, it’s clear that the “voluntary tax” label commonly ascribed to gambling is misleading at best.
In reality, gambling is a tax on the vulnerable.
So what should provincial governments do?
They should first admit that their addiction to gambling profits has become a serious problem for the citizens they are supposed to protect. They can then start the process of recovery by keeping gambling money separate from legitimate tax revenues, preferably by creating a special fund aimed at relief of poverty.
Gambling profits could then be used to help the poor save. The new fund could be used to start a prize-linked savings program, offering savers the chance to hit the jackpot with their deposits. Alternatively, the government could top up low-income savers’ accounts the way the federal government chips in to RESPs.
Rather than lose their money, they’d be saving it, making low-income families more self-reliant and less likely to turn to payday loans.
Another option for the new fund would be cash transfers to low-income households, similar to social assistance payments.
With ALC revenues on track to hit historic lows this year, the costs of governments getting clean have never been lower.
As casinos prepare to reopen, the Atlantic governments should seize the opportunity to re-imagine their gambling system and kick their gambling habit for good.
Johanna Wolfert is a researcher at think tank Cardus and co-author of Royally Flushed: Reforming gambling to work for, not against, Atlantic Canada.