Gambling and other sins

When I first moved to Nevada (the year shall remain vague) the Silver State still had pretty much of a gambling and quickie divorce monopoly – and a reputation as a rather sinful place. Today almost every US state has casinos and/or a lottery. Getting a divorce has become so easy these days, there’s really no need for a Reno or Las Vegas divorce. “Sin City” is now about as sinful as Disneyland.

Nevadans were once proud of their “sinful” status, but now about the only exclusive “sinful” thing Nevada has left is legal prostitution. Even that may be doomed if US Senator Harry Reid has his way (although one Nevada lawmaker has proposed a new tax on prostitution to help solve the state’s budget crisis). Of course the fact that prostitution is illegal in the other 49 states doesn’t mean there’s no prostitution there.

Yes, I DO have a Germany-related point here.

I recently wrote an article about casinos and gambling in Germany, Austria and Switzerland. Among other things I learned in my research: Switzerland didn’t even have casinos until after 2000; while most European countries have gambling casinos, the real money (for the tax man) comes from lotteries.

As I wrote the article, it got me to thinking about the different approaches to “sin” (and sin taxes) in the US and Germany. Perhaps because I come from Nevada, I’ve always thought the German (and Dutch) way of dealing with prostitution was more realistic, and thus more sensible than the American way. In order to be a good Puritan (American), you have to mix in a good dose of hypocrisy. This is very evident in the US approach to sex, prostitution, marijuana, gambling and most other “sins.”

The German (and Dutch) approach means accepting the fact that prostitution isn’t going away, so why not regulate it and tax it. This also applies to gambling and lotteries, and the thing that struck me was that everyone taxes casinos at a higher rate than chintzy Nevada. German and other European casinos pay a tax on gross revenue that ranges from 30 to 80 percent. Most US states get 20-30 percent from their casinos. Nevada? Can you believe 6.75 percent? (And the state has a lottery ban in its constitution. Now you know who runs the state.)

The Dutch recently cracked down on (legal) prostitutes, pointing out that they are required to include the 19 percent VAT in their transactions (which average about 50 euros per “patron”). (The Dutch also have a budget deficit.) Of course, prostitutes are also required to pay income tax, although it is not certain how many actually do.

OK, even with their enlightened approach, the Germans and the Dutch haven’t eliminated the stigma attached to prostitution, nor have they eliminated all of the criminal activities (human trafficking, money laundering, etc.) associated with that trade, but they are in a better position to deal with such problems compared to simply making something illegal and turning a blind eye.

Turning back to casinos… In most of Europe, gambling winnings are not subject to taxes (accept for the Swiss lottery). This can lead to money laundering through the casinos. Like Nevada, the state-owned casinos in Germany, Austria and Switzerland have also been hit by the Great Recession. Berlin recently had to lower the casino tax rate to help its two casinos stay above water. Austria had to do the same thing for its 12 casinos (all run by Casinos Austria AG). When times are hard, even gamblers cut back.

But perhaps the biggest issue for the casinos is online gambling. As usual, the US (including Nevada) just pretends it doesn’t exist. With only a few exceptions, so do most European countries. The German-speaking countries “ban” online gambling, but an estimated 2 million Germans (probably more) currently gamble online. The French are in the process of taking a different approach: regulate and tax online gambling. In other words, if you can’t beat ’em, join ’em. Since online gambling, like prostitution, isn’t going away any time soon, it seems to me that this is a better approach than simply ignoring it. In time we’ll see which way of dealing with sin is best – ignoring it or taxing it.