The Leaflet: All Bets Are On

Published June 7, 2018

On June 5, Delaware became the first state to offer sports betting in the wake of the U.S. Supreme Court’s recent declaration that the 1992 Professional and Amateur Sports Protection Act (PASPA) is unconstitutional. The ruling lifted a near-nationwide ban on sports gambling, thus allowing states the freedom to authorize sports betting. Before the recent reversal, Nevada was the only state with legalized sports wagering. (Delaware, Montana, and Oregon could permit limited sports betting.)

More states are likely to follow Delaware’s lead because sports gambling would generate additional tax revenue. A recent Oxford Economics study estimated that if most states legalize sports gambling with a moderate tax rate and sensible regulations, states could collect $20 billion in new tax revenue and produce more than $40 billion in new economic output.

Despite the passage of PASPA, the American Gaming Association estimates at least $150 billion per year is illegally gambled on sports in the United States, making it the country’s most popular form of gambling. Given that 44 states and the District of Columbia already allow for state lotteries and 24 states allow gambling at casinos, it is clear that many state legislators do not want to miss out on the tax revenue generated by voluntary gambling—revenue that can be used to shore up state budget deficits and finance public services and institutions.

In authorizing sports betting, states ought to ensure sports gambling regulations are not burdensome and that taxes and licensing fees are not too overbearing. To promote a competitive, flourishing legal market for sports betting, Michelle Minton of the Competitive Enterprise Institute outlined in “Legalizing Sports Betting in the United States” five features that sports gambling rules should have: adequate license availability, reasonable tax rates, diverse product offerings, robust consumer protections, and regulatory cooperation. Minton’s proposed features would dramatically help reduce black market activity and, by extension, criminal behavior.

Many states began crafting sports betting laws in anticipation of the Supreme Court’s decision. So far, 15 states have introduced bills legalizing sports betting, and four states have passed bills, not yet in effect, legalizing the long-banned activity: Mississippi, New Jersey, Pennsylvania, and West Virginia.

However, some of these states’ bills violate the criteria Minton states are necessary to foster a well-functioning market. For example, New Jersey’s legislation would levy a 17.5 percent tax rate on gross gaming revenue and a $400,000 licensing fee. Even worse, Pennsylvania’s legislature set its proposed tax at 34 percent of gross gaming revenue, coupled with a $10 million licensing fee. Onerous tax rates and oppressive licensing fees would create barriers to entry and obstruct market forces, thereby decreasing the possible benefits of sports gambling. State legislators looking to permit sports betting should avoid them.

The PASPA ruling is an opportunity for Americans to freely engage in a voluntary activity. The decision also reinforces the principle of federalism, transferring power from the national government back to the states, where the practice and scope of gambling should be determined.


What We’re Working On

Health Care
National Work Requirements for Medicaid
In this Research & Commentary, Senior Policy Analyst Matthew Glans examines Medicaid work requirements and the national work requirement standards now being discussed in Congress. “Work requirements are a vital component for welfare programs because they ensure recipients do not become unnecessarily dependent on government aid. States should continue to pursue Medicaid waivers and the flexibility they provide, but a national work requirement would be an even better solution,” wrote Glans.

Budget & Tax
Feds Reconsidering Credit Union Tax Exemption
In this Research & Commentary, Glans examines the credit union tax exemption and the debate over whether it should continue to exist. “In short, ending the tax exemption would force many credit unions to become full-fledged banks, also known as ‘demutualizing.’ A likely unintended consequence of terminating the exemption would be that it could further reduce lending to those who need it most—putting a greater burden on taxpayers, who already have bailed out banks considered ‘too big to fail,'” Glans wrote.

Energy & Environment
The Insanity of Climate Alarmism
As part of its ongoing Flashes of Freedom series, The Heartland Institute has released a new video concerning the insanity of climate alarmist predictions. Patrick Michaels, director of the Center for the Study of Science at the Cato Institute, talks about the vagueness and non-conclusive nature of climate science models. After analyzing 13 months of articles on the subject in Science and Nature, Michaels concludes there is a strong bias in these publications to over-exaggerate the likelihood of global warming and that they provide little evidence to back these claims up.

Investigations of Abuse in Public Schools Prove the Need for Child Safety Accounts
Policy Analyst Tim Benson, in this new Research & Commentary, suggests Tennessee should enact Child Safety Accounts (CSA) after a local newspaper reported rampant child abuse in that state’s public schools. A recent investigation by The Tennessean shows there were 611 cases of suspected child abuse during the 2017–18 school year and 647 cases of child abuse or neglect at 460 different Tennessee schools in 2016 and 2017. Benson noted, “Under Heartland’s CSA program, students would be eligible for a CSA account if their parents have a ‘reasonable apprehension’ for their children’s physical or emotional safety based on the experiences of their children …”

From Our Free-Market Friend
Rent-Seeking or Just Honest Graft?
Mark Franke, an adjunct scholar at Indiana Policy Review, discusses in this article a $221 million renewal project that Fort Wayne, Indiana is now considering. The project would repurpose the vacant General Electric industrial campus near the city’s downtown. One estimate calculates the net value of the completed project would be only $80 million, based on cash flow analysis. Taxpayers would foot the bill for this project. Frank notes that this is not the first time the Fort Wayne City Council has put taxpayers on the hook for public projects. A recent riverfront development cost the city $35 million, which is particularly troubling because a real estate appraiser valued the finished property at just $11 million.


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