Government gambles on privatizing tax collection

BC’s media, and the legislature, have been talking about gambling this week. The government plans to introduce PlayNow, a website that will allow people to bet on sports results. The government’s Solicitor General Rich Coleman says this is not an expansion of gambling. This claim is hardly credible, but that’s not the real issue. What’s really significant about this announcement is that the government is finding a way to privatize taxation, and to make the tax system even more regressive.

Since taking power in 2001, the government has increased revenue from gambling from $1.4 billion to $1.9 billion – that’s billion, folks, rivalling forestry revenues. Their longer term plan is to increase revenues to $2.7 billion by 2007 and increase the number of people participating from 59% to 65% of the population. No expansion there, either, Mr. Coleman?

Today’s Vancouver Sun includes an editorial about this issue. In focussing on government expansion of gambling in British Columbia, the editors have brought up an important issue. In quoting from the Liberals’ New Era promise to stop “the expansion of gambling that has increased gambling addiction and put new strains on families”, they have identified yet another un-promise of Gordon Campbell’s Liberals. In asking whether the people of BC want to bolster government revenues with expanded gambling, the editors have asked the right question.

Unfortunately, the editors didn’t wait for an answer before leaping to what appears to be an ideological constant with the Sun-“maybe it’s time to allow the private sector to compete.”

I say unfortunate, but after a moment’s reflection, I realised the editors’ reflexive nod to the private sector is useful: it reveals something more alarming than a government scrambling to raise more money, at (so to speak) any cost. The comment reveals the gambling grab as an attempt to channel money back into the government purse through the private sector.

This isn’t just a case of the government supporting business, and then collecting some corporate income tax from the resulting boom in business. Gambling is a special case: casinos, for example, must pass two thirds of their revenue to the provincial government. (One sixth goes to the local municipality, and one sixth to the casino operator.) It’s not clear how much of PlayNow’s revenue will go to the Crown, but it does seem obvious that the government’s goal is to generate revenue to replace the tax revenue it cut back at the start of its term.

Even that wouldn’t necessarily be so bad, were it not for two things: the social cost of gambling, and the regressive nature of gambling profits as a form of tax.

The latter is simple enough: it is widely known that gambling tends to draw disproportionately on the income of the less wealthy members of society. This government made tax cuts in its first year that favoured those in the top tax brackets much more than those earning less money. Now they’re trying to recoup some of that lost revenue by taking profits from a gambling operation that will be fuelled by those same lower income earners.

Privatization and progressive democracy are subjects Dogwood Initiative monitors and about which we comment. The social cost of gambling is, however, outside our expertise. So we’ll let Gordon Campbell speak on this subject.

Back in 2000, here is Mr. Campbell going after then-Premier Glen Clark over gambling (Hansard link):

“This government has been absolutely reckless in its whole pursuit of gaming policy. Again, this Premier is no stranger to that. I asked this Premier in his estimates as Attorney General, when this government made the reckless decision to expand gambling, what he had done to forestall criminal activities around gaming in B.C. and its rapid expansion. His answer essentially was: “I’ll cross that bridge when I come to it.” Well, Mr. Speaker, this government and the New Democratic Party that makes it up have suffered severely for their lack of due care and due diligence in their gaming expansion policy.”

Mr. Campbell might as well have been speaking to himself, and his own party.

Jenny Kwan hammered the Liberals for their duplicitousness in the legislature on Monday (go to Hansard, then find INTERNET GAMING).

But the NDP is not purged of its gambling ambitions. During the 1990s, John Horgan was one of three NDP bureaucrats, along with Ian Reid and John Heaney who worked in the B.C. Ministry of Management Services, which oversaw the expansion of gambling across the province. As recently as 2003, Horgan, now a private consultant, developed “a sophisticated campaign to convince Vancouver city council to lift a moratorium on slot machines,” according to Charlie Smith in the Georgia Straight (link) Horgan wants to be the NDP candidate in Malahat-Juan de Fuca in the next provincial election, and if elected would bring the gambling agenda back into play on the NDP side.

It all comes down to finding revenues to match expenditures. Governments have been steadily cutting corporate taxes, royalties, and generally reducing the costs of doing business in British Columbia for corporations. And they are making some of it up in gambling revenue. We don’t need to promote gambling-there is another choice if any government has the courage to make it.

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