http://www.tnr.com/docprint.mhtml?i=scholar&s=levy101503

CHICAGO SCHOOL
Loaded Dice

by Jacob T. Levy

Only at TNR Online
Post date: 10.15.03

During the California recall, candidate Schwarzenegger and his team
repeatedly attacked Indian groups for lavishing casino-generated campaign
contributions on Lieutenant Governor Cruz Bustamente. Then, after the
election, Governor-elect Schwarzenegger made taxing Indian casinos one of
the centerpieces of his deficit-reduction plan, apparently oblivious to the
conflict between this and his pledge not to raise taxes, and to the legal
and constitutional issues involved.

The subtext both of Schwarzenegger's charge and his proposal is corruption:
the idea that there's something intrinsically unseemly about the gambling
industry, and that tribal Indians benefit from unfair special advantages
(Schwarzenegger argued that the tribes should be made to pay "their fair
share"). But neither point is necessarily true: It's not clear that there's
anything especially problematic about the tribes deploying their
gambling-derived funds in the political process. And it's even less clear
that the tribes should fork over more of their gambling revenue to the
state.

The idea that there's something especially corrupt and corrupting about the
gambling business has intuitive appeal on a couple of levels. First,
gambling is a "vice" business. Second, there seems to have been mob
activity in the development of legal casinos, i.e. in early Las Vegas.
Third, one certainly does hear stories about the "gaming" lobby spending
lots of money on politicians, er, campaigns. (One often hears them from
William Safire, who beats the "corrupt gambling industry" drum regularly.)

But the "gambling = corruption" intuition gets most of its mileage from the
presumption that the first of those has a lot to do with the other two. It
doesn't. Gambling may be a vice, it may be immoral, and it may be
addictive. But whether or not it is has nothing to do with the political
economy and moral economy of the gambling industry. What does affect those
things is gambling's ambiguous legal status. Except when gambling is run
directly by the state (i.e. in lotteries), it's subject to heavy and pretty
arbitrary regulation. There's ordinarily not some stable set of rules,
which, if satisfied, entitles one to open a private casino. Instead, the
opening of each casino requires laborious negotiations with state gambling
commissions and/or legislatures and/or governors. Which means that every
would-be casino operator enjoys the prospect of semi-monopolistic profits,
but only if a set of political decisions go his way, and he can then keep
potential competitors from benefiting from similar political decisions in
the future.

If anyone has ever designed a way to prevent that combination of
circumstances from leading to massive political spending, I haven't heard
about it. Tribal casinos certainly aren't immune, since tribes are
obligated to negotiate with states over the opening of each new casino--and
since the question of which tribes get the federal recognition that
triggers the right to operate casinos involves some discretion at the
levels of the (federal) Bureau of Indian Affairs and Department of
Interior. But neither are the tribes any more blameworthy than any other
player in the gambling industry, all of which have to negotiate for the
right to operate casinos. For that matter, the logic of the situation would
also apply if, say, office-supply retailing was generally illegal, except
for those retailers who managed to wangle a special dispensation from the
state. Since the problem is structural, it can only be fixed with a
structural solution--say, a general move toward legalization and procedural
consistency. Any special focus on tribal gambling is dubious at best.

Taxation is a slightly different story, though there's a lot dubious logic
here as well. (Newspaper stories about tribal casinos' exemptions from
state taxes always seem to start off with an utterly irrelevant description
of the expensive cars, high incomes, and great wealth of one or two utterly
unrepresentative Indians. But why should tribal sovereignty be a right that
gets waived if Indians get too rich?) In this case, there obviously is
something special going on with respect to Indians: States can't tax tribes
or individual Indians living and working on reservations. But that
special-ness is constitutionally mandated (even if it has been much
whittled-away since the Constitution was adopted). That being the case, the
required negotiations between tribes and states over casinos have actually
made the tribes a greater source of state revenue than they'd be without
casinos, since states can and do insist on hefty tribal
payments-in-lieu-of-taxes as a prerequisite for approval.

Of course, these contributions are typically justified as funding for the
roads and other services that the increased traffic to reservations
requires. But I'm not aware of any evidence demonstrating that the size of
the contributions matches the expenses the states and localities actually
incur. Indeed, the fact that the tribes are being looked at as a revenue
source during California's budget crisis suggests that something other than
a fair balancing of costs and revenues is at work.

None of which is to say that a heavily casino-dependent economy is good for
Indians. Casinos in the current legal structure are a bit like oil and
diamonds in the resource-curse theory of development--they don't require
any broad-based development of the tribal economy, they tend to loosen the
ties of accountability between leaders and the led, and they tend to
concentrate power at the center. But the interests of reservation Indians
in broad-based and decentralized development is the last thing on the minds
of those who see Indian gambling revenues as a juicy target for taxation.

The key point is that Indians are, once again, looking down the barrel of
some especially adverse and arbitrary treatment by a political system in
which they make up a tiny minority. If I were in their shoes and had some
money on hand, I'd probably spend it on political campaigns, too. Wouldn't
you?


Jacob T. Levy is Assistant Professor of Political Science and the College
at the University of Chicago, and the author of The Multiculturalism of
Fear (Oxford 2000). He writes regularly at volokh.com.