The American government‚Äôs treatment of its native population has often been mean and has been consistently erratic. But little in the long history of relations with American Indians is as peculiar as the granting of Indian tribes a privileged position with regard to the approval of gambling casinos. In some states, Indian tribes are essentially the only ones allowed to have casino licenses, while other states give priority to applications from tribes.
Serious discussions in the past of compensation of American Indians for mistreatment of their ancestors considered head start type programs, retraining, intensive medical care and counseling, and cash gifts. Licenses to run casinos? Too absurd to be discussed, yet that absurdity became a reality during the past couple of decades.
To be sure, as Posner indicates, such licenses are valuable: revenue from Indian casinos amount to somewhere between $15 and $20 billion. This is why certain tribes, such as those with licenses for the Foxwood and Mohegan Sun Casinos in Connecticut, have received considerable wealth from their privileged position with regard to getting casino licenses. Gambling licenses are valuable when they are limited in number because Americans and citizens of many other nations have demonstrated throughout history a great desire to gamble, whether or not gambling was legal. So state-run lotteries-essentially the only lotteries that are legal in the United States and other countries-produce about $20 billion of annual revenue for American state governments. These states collect about half of this revenue as taxes. Casino licenses to private companies in Los Vegas and elsewhere that allow widespread gambling typically sell for a lot because of gambling's popularity and the restrictions on competition.
I agree with Posner that the case for government management and entry restrictions in the gambling industry is weak and unpersuasive. Even if one opposes gambling because it is sometimes addictive or for other reasons, a better approach than the present system would be to allow free entry into the casino industry and other gambling activities. It is more effective to allow entry and tax sales or profits made by privately run gambling establishments. The rates of taxation would be determined by revenue considerations and attitudes toward gambling.
Of course, some forms of gambling would move underground if tax rates became high enough. Michael Grossman of CUNY, among others, has shown, for example, that there is considerable smuggling of cigarettes into cities and states with high cigarette tax rates from states with low rates. However, underground gambling could be considerably reduced if governments were willing to apprehend perpetrators and punish them sufficiently.
Enforcement is more difficult against the most important trend in gambling; namely, the rapid growth in the quantity and variety of gambling over the internet. For example, it will soon be possible, if not possible already, to bet in real time on the outcome of particular pitches in baseball, or individual plays in football. Internet gambling is particularly difficult to regulate because it can originate anywhere, including at sea, and can relocate easily when authorities try to close down a site. So the internet is in the process of making gambling a global and highly competitive industry that can readily evade taxation.
But to come back to casinos and tribal privileges, why should subsidies to American Indians be tied to casino gambling? There seems to be at best a weak connection between which tribes gain the most from these subsidies, and their poverty, disease burden, and how much they have suffered from discrimination. On the contrary, tribes benefit the most when they are sufficiently close to large and well off populations, criteria that are likely to mean that their members do relatively well anyway. This method of distributing benefits to Indians seems inconsistent with any reasonable criteria of which tribes should receive larger subsidies or other benefits.
So my conclusion is that the special casino privileges granted to tribes is a continuation of the long history of senseless policies by United States governments toward American Indians.