The Super Bowl of Sin Taxes
State legalizations of sports betting and marijuana prove government is about taking, not helping.
Daniel Henninger Feb. 16, 2022 WALL STREET JOURNAL
Some 31 million Americans are estimated to have bet more than $7 billion on some aspect of Sunday’s Super Bowl LVI, including who won the coin flip and whether Odell Beckham Jr. would score a touchdown. For Joe Biden and the Democrats, Rams-Bengals was a win-win, a sure bet.
Odds are that no small amount of the $7 billion wagered came out of the megabillions Mr. Biden’s mailed out as stimulus checks. Winning a wager is more fun than paying the rent, but when you win more than chump change, Mr. Biden gets a piece of the action. Gambling winnings of $600 or more are taxable as federal income, reportable on IRS Form W-2G and subject to withholding at 24%. The state in which you placed the winning bet also wants its piece. In the new world of legal sports betting, no one will get more hops through the end zone than Uncle Sam.
I don’t expect the Biden White House or Nancy Pelosi will be heard saying that the cost of their pandemic legislation will be close to “zero” because some recipients’ gambling payouts will be coming back to the Treasury as taxes. No doubt some vestigial sense endures that it’s unseemly for the government to make money from an activity with a dark underbelly.
The proliferation of TV commercials by betting services such as DraftKings and FanDuel was enabled after the Supreme Court ruled in 2018 that a federal law banning sports betting in most states was an unconstitutional infringement of states’ rights. Since then, 30 states and the District of Columbia have legalized betting on sports. New Jersey, the U.S. sports-bet capital, took in $200 million in gambling tax revenue last year.
Recreational marijuana is now legal in 18 states (and, naturally, Washington, D.C.), often after the voters’ approval in referendums. A Pew poll last year found 60% support for medical and recreational marijuana use. New York’s Sen. Chuck Schumer, one of the most reliable weather vanes in politics, has just given legal pot his enthusiastic support. He plans to introduce a federal legalization bill in April. “As majority leader, I can set priorities,” Mr. Schumer said last week. “This is a priority for me.” It has a cannabis tax that starts at 10% and rises eventually to 25%.
I’d say we are learning something useful from the concurrent political approval of taxable gambling and marijuana. We are learning that much of contemporary American government, which typically defends itself as providing for society-enhancing public “needs,” is in fact now amoral.
After decades of pretense from government about its good intentions, ultimately it doesn’t much care one way or the other anymore, no matter whether the issue is social welfare spending inside the Build Back Better bill or legalizing a psychoactive drug. Any previous pro-social purpose has been overwhelmed by the crude need simply to maximize revenue no matter the source, especially in such open-spigot Democratic spending states as New York, New Jersey and Illinois. In California, legal betting has been blocked by several casino-operating Native American tribes.
We are legalizing marijuana just as opioid addiction and overdoses from “recreational” fentanyl skyrocket. The phenomenon of gambling addiction is well established, and since sports betting is often a repetitive, screen-based activity, the dopamine hook surely will kick in for some percentage of sports bettors just as TikTok has pulled many adolescent girls into its can’t-stop video world, as described recently in this newspaper.
In virtually all the legalizations of marijuana or gambling, the politicians include language about creating programs for “prevention” and rehabilitation. It’s boilerplate, a pro forma caveat that rarely delivers.
Recall how for decades proponents of deinstitutionalizing the severely mentally ill have promised programs to provide needed meds to patients outside a hospital setting. Well, look at the streets of New York, San Francisco and Los Angeles, filled with the disorganized, often violent mentally ill and drug addicts.
The burden of any damage done to individuals from on-demand marijuana or betting will be borne by their desperate families. Governments will get the one thing they want–a steady stream of tax revenue from both users and the commercial cannabis and sports-bet interests piling in to exploit these compulsions.
When more people understand that the goal of governments today is to take rather than help, as they piously claim, perhaps we can have a sensible discussion about whom to tax and for what purposes.
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