This mailing from DraftKings was part of the marketing blitz that accompanied the Sept. 1 start of sports gambling in Kansas. (Eric Thomas)
Folks who imagine dark conspiracies in Kansas politics — meetings behind closed doors devising sinister plans — should consider the possibility that legislators are just bad at their jobs.
For evidence, read the blockbuster story by Marco Schaden, published last week on the Wichita and Kansas City Beacon websites. The headline alone will make your head explode.
That’s not a typo.
That’s a .00058% return for the state from all the wagers placed by state residents in February. Put another way, the state collected a whopping $5.85 for each million dollars wagered.
Because of the way legislators wrote the sports gaming law they passed in 2022, companies have been able to avoid taxation through entirely legal means. They can deduct the cost of promotions in Kansas, skirting taxes they have to pay in other states. The federal government, meanwhile, has different rules and collects a more consistent amount month after month.
You might have thought lawmakers would have been ashamed after the New York Times reported how gambling lobbyists exerted outsized influence in bending state law to their will. You might have thought senators and representatives would have addressed the obvious problem during the 2023 session.
But you’d be wrong. As Schaden reports, despite interest from a few in Topeka, no one ultimately did anything.
A Legislature that knows what it’s doing wouldn’t set itself up for such an embarrassing revelation.
Sports gaming would have come to Kansas eventually. After the U.S. Supreme Court’s 2018 ruling overturning a federal ban, change seemed inevitable. But lawmakers had a choice about how to regulate and tax the industry. They didn’t make sensible decisions.
Our legislative leaders like to style themselves as moral crusaders. We heard them pontificate about some agendas and parental rights and the evils of the LGBTQ community all last session. One representative said some students needed Jesus in their lives before any pesky science and math.
But I’ll tell you about an actual social evil, one that wounds and bankrupts families and individuals: problem gambling.
Gaming interests, in the words of the Times, showered lawmakers “with donations, gifts and dubious arguments.” So forget about the regular Kansans left behind.
Stephenie Roberts, a social worker and gambling addiction counselor in Wichita, told the Beacon that gaming promotions caused real problems.
“I call that get-into-debt money instead of free-play money,” Roberts said. “I mean, that’s fraud or something. That’s advertising money. That’s money to hook the player in, money to entice them to play and to get them started. That’s not right.”
Indeed, wrote the Times’Eric Lipton and in November, “these tactics have been banned in some countries because of their potential to hook people predisposed to compulsive gambling.”
Kansas lawmakers apparently weren’t swayed by the experts or even common sense. Those we elected decided not only to permit such promotions, but to hand out tax benefits for using them.
Can you really imagine these folks implementing some dastardly plan harming Kansans? I’d be impressed if they can find their offices in the Statehouse.
Here’s how taxes on morally problematic sectors of the economy should work. We know that alcohol, tobacco and gambling cause social or medical harms. But we also know that people want to drink and smoke and gamble, so outright bans only serve to criminalize everyday behavior. We therefore levy hefty taxes on these substances and behaviors, imposing an extra cost on those who choose to indulge.
That cost serves two distinct purposes. First, it dissuades some people from harmful behaviors. Secondly, it allows the government to fund programs to help those most harmed by drinking and smoking and gambling. In a perfect world, we could ban harmful behavior totally, but the failed experiment of Prohibition in the United States showed that such approaches backfire. (This also explains why cannabis will eventually be fully legalized, but that’s for another time).
Both Republicans and Democrats have something to like in levying sin taxes. The GOP can raise revenue from sources other than a progressive income tax. Democrats can fund do-gooder social programs.
Afterward, everyone can enjoy a cigar and cocktail while betting on the football game.
In this case, however, Kansas lawmakers were played. They were bamboozled. Fast-talking, out-of-town hucksters took them for a ride.
Rather than admit its failure, the Legislature simply turned its back on the issue in the 2023 session. As big gaming companies fleeced Kansans and stiffed the state treasury, Senate President Ty Masterson and House Speaker Dan Hawkins instead focused on restricting food aid to needy Kansans, promising private school vouchers and trying to pass a flat tax.
Never mind the fact that if they had actually levied sufficient taxes on sports gambling, these legislative leaders could have eased the path of their favored tax policy.
It wouldn’t have been that difficult. But only if you actually know how politics and government works.
At this point, none of us should assume that Kansas lawmakers have the slightest clue.
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