Why now may be the time for Ontario to go cold turkey on its gambling addiction

ANALYSIS: A new report from a Hamilton think-tank argues that COVID-19 presents the perfect opportunity for Ontario to end a “tax on the poor” and replace it with something better
By John Michael McGrath - Published on Jun 30, 2020
Ontario casinos have been closed since March 15. (iStock/welcomia)

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Every year, Ontario Lottery and Gaming — the Crown corporation that regulates Ontario’s casinos and runs the lotteries — sends around $2 billion to the province’s coffers. In some years, it’s more; in some years, it’s less. It was $1.8 billion in 2012-13, but it’s been $2 billion or more ever since. This isn’t an accident: the Liberal government urged OLG to increase its revenue to help battle the deficit, and the public agency delivered.

But, on this score, as on so many others, 2020 will not be a normal year. The casinos, which bring in billions of dollars for OLG, have been closed since March 15 and almost certainly won’t be able to reopen until later in the summer, if then. OLG, and thus the province, is looking at a billion-dollar hole in its books.

If there’s a silver lining to this fiscal storm cloud, it’s that this might give Ontario a chance to reassess its relationship with gambling — and where that revenue goes. At least, Brian Dijkema and Johanna Wolfert, authors of a new report for Cardus Research in Hamilton, hope it will.

“It’s a tax in disguise and effectively a very regressive tax in disguise,” Dijkema says. “If you look at the percentage of money being spent on gambling, it’s four and a half times more for people in low-income levels than people in high-income levels. The rest of the tax system is the exact opposite.”

While even for low-income people, the amount of money spent on gambling amounts to less than 1 per cent of household income, Dijkema says those sums add up. The impetus for this report, in fact, came from earlier work Cardus had done on payday lenders and how precarious the finances of low-income people can be.

“People who were able to save even a little bit of cash, even $300, if they have a little bit of money, the odds of them taking out a payday loan went way, way down,” Dijkema says. “So how can we encourage the habits that generate that?”

As for the argument that gambling represents a “tax” on working people, Dijkema insists this isn’t a metaphor: OLG’s revenues flow into the province’s general revenues and are spent like any other tax dollars, and the government (through OLG) spends considerable sums to maximize the collection of that money.

Gambling dollars are so tempting to government — “addictive,” as Dijkema puts it — precisely because successive administrations (Liberal, New Democrat, and Progressive Conservative) have used gambling revenue to supplement more politically painful tax hikes and spending cuts.

OLG does fund substantial efforts to control gambling addiction and minimize the social harms of gambling. It contributed $17.3 million to its Responsible Gambling program in 2018-19 (according to the agency’s most recent annual report).

“Responsible Gambling also remains fundamental to OLG’s business and its future success,” the report says, adding that OLG’s PlaySmart program has been recognized as world-leading by the World Lottery Association.

However, the Cardus report notes that OLG spends several multiples more money on marketing gambling to Ontarians than it does telling them to be responsible about it: more than $200 million in the 2018-19 fiscal year.

Cardus has, in the past, offered a number of conservative policy prescriptions, and the think-tank describes its work as “a desire to translate the richness of the Christian faith tradition into the public square for the common good.” Some of Cardus’s recommendations, such as changing the rules around municipal-contracting and labour laws in Ontario, were adopted by the current Progressive Conservative government in 2019.

However, Dijkema insists his criticisms of gambling in Ontario aren’t an attempt to pursue a conservative, small-government agenda by other means.

“We’re more interested in what is the proper role of the state in civil society, in a flourishing society,” he says, adding, “In fact, you could say we’re arguing that if you’re going to tax, you need to be open about it and make the argument for it.”

Dijkema isn’t calling for an abolition of gambling in Ontario. The Cardus report looks at several alternatives to the status quo, including simply rebating gambling revenues directly to low-income people. If that’s untenable, other options include prized-based savings programs, which have been used in some U.S. jurisdictions, as well as in the United Kingdom. In a prize-linked savings program, people put money in a low-interest savings account or bond, in exchange for being effectively entered into a lottery. More savings equals more chances to win a prize. The same principle can be used for bonds. These kinds of programs, instead of taking money disproportionately out of low-income households, could help them build savings.

“What we’re trying to do is turn bad habits into good,” says Dijkema. “I think what we need to do is not focus on the people who are gambling but on the entity that’s addicted to the revenue. They’re the problem. Who’s addicted in this situation? It’s the government.”

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