Tax the Oil Companies

For a sufficient reason a man might do anything: murder his wife, enter a monastery, move to Texas or take up the novels of Ivy Compton-Burnett. One such reason is usually enough. He seldom gets 30 billion reasons for doing anything. Thirty billion, after all, is a very large number. If you tried to count it out a second at a time, it would take you 100 years, with no time out for sleep. Today in this country, we have 30 billion sound reasons for doing one particular thing, but a combination of fear, Victorianism and political self-righteousness is stopping us. Immediately, and on a nationwide scale, we should legalize gambling.

Thirty billion dollars in net revenue should be reason enough. According to conservative estimates, that could be the Government's take, after expenses, if gambling were legalized tomorrow. It would represent a tax, of course, but it would be a tax that is voluntary, would be relatively uncomplicated, and could cut the personal-income-tax bill by more than half. Put simply, billions of dollars in revenue now paid to organized crime would be cut off in one stroke and could be applied to our personal-income-tax bill.

To begin with, according to such gambling experts as author John Scarne, and sources in the Justice Department and the Senate Rackets Committee, Americans now lose some 50 billion dollars every year gambling. That is five times the yearly net income of this country's 20 top corporations and is a little shy of what we spent last year on national defense. And according to the Internal Revenue Service, only $800,000,000 of it can be accounted for. Someone is making billions on gambling, and it is not the Government of the United States.

There is no escaping the fact that we are a gambling people. The 50 billion dollars was expended by 90,000,000 Americans who staked it on such as: the fortunes of horses and left-handed pitchers; pro (continued on page 96)Tax organized crime(continued from page 93) and college football; basketball and hockey; slot machines, punchboards, dice, bingo, keno, baccarat, bridge, poker, mahjongg, dominoes, roulette, wheels of fortune and the political aspirations of Ronald Reagan.

The vast bulk of this gambling, of course, was outside the law. It was therefore untaxable. Nevada is the only state in the Union where all forms of gambling are legal (except numbers). Pari-mutuel betting on horse races is legal in 24 states, on dog races in 7 states, and gambling on jai alai is legal in Florida. Bingo--the national sport of those who can endure church basements--is with us everywhere, though it is legal in only 11 states. Everything else is against the law (with the exception of the New Hampshire lottery) and therefore, for all practical purposes, untaxable.

John Scarne made a survey several years ago and found that 70 percent of the adult American population gambles at one time or another. All of them gamble in apparent ignorance--or indifference--of the fact that they are also supporting a vast, clandestine, untaxed industry. Scarne estimated that more than 1,600,000 people are involved in book-making alone, handling a gross illegal play of 64 billion dollars annually on the single sport of horse racing. And bookmakers in New York, Chicago and Los Angeles will tell you that the ponies now compose only one seventh to one fifth of their total play. Among the changes television has caused in our national life is that it has apparently made pro football and pro baseball even more attractive to gamblers than the fortunes of Likely Lad in the fifth at Hialeah.

Gambling on sports is only a part of the total picture. The numbers (or policy) racket accounts for an estimated five billion dollars nationally, with $600,000,000 bet annually in New York alone, of which only a small percentage goes back to the bettors. One high-ranking New York police official estimates that another five billion dollars changes hands every year in professionally handled "games" of cards and dice. The Association of American Playing Cards Manufacturers says that 68,000,000 decks of cards were manufactured in 1965 (400,000 of them marked) and estimates that 47,000,000 people play for money, mostly poker. Some 4,000,000 pairs of dice were sold in 1965 (150,000 were loaded).

True, a good deal of this gambling is on a simple man-to-man basis, an expression of man's pleasure--or at least willingness--when it comes to risking loss for possible gain. There is no way to regulate or tax spontaneous recreational gambling between friends, nor any reason to. But an enormous amount of the money we gamble does not go to our friends (and back again) but to that dark, modern colossus, the Mob (or Mafia, Syndicate, Cosa Nostra--take your pick). Of the choice 2000 Americans whom law-enforcement officials would like to see in cells in Atlanta or Leavenworth, some 1200 have their well-manicured fingers in gambling. Their gross is estimated conservatively at 10 billion dollars a year, and liberally at 20 billion dollars. About half goes toward expenses: pay-offs to cops and politicians, fees and salaries for enforcers and the rest of the rank and file. So, while you and I are struggling with Federal and state income taxes, the boys with the diamond pinkie rings are rolling in money, laughing their heads off. It isn't often that you can make a whole country your own personal sucker.

There is a further point, even beyond the fact that you and I are supporting these thieves. According to such authorities as muckraker Fred J. Cook (author of A Two Dollar Bet Means Murder) and Milton Wessel, chief Federal prosecutor at the 1959 Apalachin crime-syndicate trial, these lush gambling profits provide the basic bank roll for the underworld in this country. Every time you put a quarter on a number or bet two dollars with a bookie, you are helping finance loan-sharking, prostitution and murder, not to mention the traffic in heroin and the corruption of police departments.

In short, gambling earnings have become to 1967 what bootlegging profits were to 1927, and for the same reason. The underworld is providing what the Government, in its misguided self-righteousness, is withholding. People wanted to drink and a minority group of zealot do-gooders and Bible thumpers decided it was bad for them--which promptly paved the way for the organized underworld as we know it today. People want to gamble, and the underworld will provide the action. And with the profits, they finance other criminal activities and, worse, are buying their was into the mainstream of American life. They are buying real estate, textile mills, skyscrapers, grocery stores, saloons: anything and everything that will turn a buck. We could conceivably find ourselves one morning living in a country dominated by a criminal oligarchy devoid of moral standards. But there is a wide-open, simple, legal way to stop them: We can take away the bank roll. And the way to do that is to legalize gambling throughout the United States.

And that means legalize it in all its forms: off-track betting in every state; football and baseball pools; casinos in states other than Nevada; legalization of numbers; national and regional lotteries; licensing of private gambling clubs--anything that will allow an American citizen to do legally what he now does illegally. And from all of this money, the Government can collect tax revenue, as high, perhaps, as 25 percent. There is no logical reason whatever for our driving the hard-pressed taxpayer into violating the law and doubly enriching the underworld, to boot--which is precisely what is happening today. The first enrichment comes from cash losses; the odds, even in unrigged gaming, are against the gambler; the second enrichment is indirect and is in the form of personal income taxes, which buy identical Federal benefits, services and expenses for the average taxpayer and the crook alike, and which the crook gets for free. We are virtually alone, among civilized countries, in persisting in this punitive puritanism.

There will, of course, be a small but noisy uproar over the so-called moral issues involved. Some law enforcers will say that the Mob will take the whole thing over (the same ones who cannot seem to stop the Mob from running it now). The Calvinists of the left, new and old, will no doubt claim that legalized gambling is the final evidence of the decadence of capitalist society, that the poor will be the great sufferers while the rich will simply get richer. Other voices can be expected to invoke the names of our noble founding fathers and proclaim that Americans succeed only through hard work and virtue, that relief rolls will soar and moral values will plummet.

These objections are easily disposed of. To begin with, the poor are already gambling on a tremendous scale. The Mob doesn't need high rollers to get rich; they can do it on a nickel or a dime at a time. The poor buy raffle tickets on Cadillacs from their local churches, they put money into baseball pools, they clip get-rich-quick coupons from the newspapers and, when they have it, they put two dollars down with a bookmaker on a horse. More than anything else, they play the numbers. The New York police estimate that $350,000 is invested in numbers every day in Harlem alone. That's gambling--and whether it's "good" or "bad" for the poor (or the rich), you don't eliminate it by making it illegal, as is now apparent.

But what does happen when gambling is legalized? Let's look at "policy."

Numbers, or policy, had its beginnings among the Italian immigrants who settled in East Harlem. Negroes started playing it around the turn of the century, but it did not become a major racket until 1932, when beer baron Dutch Schultz realized that Prohibition was about over and that he needed to diversify.

The simplicity of numbers must have grabbed Dutch from the start. To play, you pick any number from 000 to 999. (continued on page 162)Tax organized crime(continued from page 96) The odds against you are, therefore, 1000 to 1. But the pay-off is only a standard 600-1, except on certain numbers that are paid off at lesser odds because they are bet so frequently that if they were hit, the numbers bank would take a bath (711, for example, or Willie Mays' batting average on any given day).

You can start betting at a quarter in New York and for as little as ten cents in places such as Houston, which is why numbers is the poor man's favorite form of gambling. The winning number is decided from a previously designated and easily available figure, usually the last three digits of the mutuel handle at a race track. For example, if the total betting handle at Hialeah were $2,465,263, the number would be 263. It is conjectured that the New York Daily News, a politically conservative mass-circulation tabloid which suspects that public welfare was started by Lenin and that the civil rights movement is a Kremlin conspiracy, is the largest-selling newspaper in Harlem, because it is the first paper on the stands in the evening with the winning number.

What is really immoral about this situation is that the enormous winnings are taken out of Harlem every day to fill the pockets of organized criminals. If numbers were legalized, and the estimated 10,000 runners now in the numbers business were made Federal civil servants at $100 a week, more would be accomplished than by any antipoverty program yet designed by the Great Society. Some $50,000,000 a year in salaries alone would be pumped into Harlem; large numbers of people who are now technically outlaws, and unable to obtain credit, would suddenly become job-holding solid citizens, with stakes in their own community and eligible finally to pay income taxes, something they now do not do. Expand this to the ghettos of Los Angeles, Cleveland, Chicago, Philadelphia and our other great cities and you just might make a small beginning toward reversing the decay of the American city.

"Most New Yorkers approve of off-track betting and many churches conduct bingo games to raise money," says Harlem state assemblyman Charles Rangel, a former U. S. Attorney who wants numbers legalized. "But neither of these would have very much importance to Harlem. Walk along Lenox Avenue and, if you look like you belong, somebody will ask, 'What's the figure?' And I know grocery stores that haven't sold a bottle of milk in years."

If those phony grocery and candy stores were turned into legal betting shops, under the supervision of the Federal Government, we would accomplish several things. In a place like Harlem, for example, everyone knows that numbers could not flourish without Mobpurchased protection from the police department. The occasional raids are usually tipped off in advance (a cop with the hood up on his car, pretending to tinker with his motor, is one signal to the runners to stay off the street). Legalize it, put it out in the open, and we would, first of all, cut down on hypocrisy about our laws and, secondly, create a new respect for the police.

There are some fears abroad about what legal gambling will do to all citizens, never mind the poor. The fears come down to these major myths: that women would flock to betting parlors to spend the milk money; that the poor would spend what little money they have in the hope of a big score; that relief rolls would consequently soar, thus wiping out whatever revenues the state had garnered from the gambling handle.

Nevada, for example, has the most suicides of any state in the Union. The counterargument is that Nevada is a totally abnormal situation, a state in which gambling is the only real industry, and has attracted a major portion of the itinerant compulsive gamblers in the United States. The argument continues that Nevada would not have these negative statistics if gambling were part of the normal way of life in every state. An American investigating Britain's legalized gambling in 1963 "was astonished," according to British writer Anthony Sampson, to find that "many punters [gamblers] in Brixton were regularly betting two or three pounds a week from weekly earnings of 12 to 15 pounds." The American observer did not reflect that bets of $5--$9 a week were recreation, in the same category as drinking in a pub or taking a train to London for the day, and the free choice of those gamblers. Gambling in Great Britain has, in fact, expanded almost 1000 percent since most forms were legalized in 1960, and many British politicians and clergymen are now shouting from the rooftops about decadence and decline. Reading them, you must assume that the great majority of British children eat sawdust and doorknobs for breakfast. The 1000-percent increase loses significance when you reflect that Britons were only gambling an average of ten pence per capita each week before gambling was legal.

There still is no evidence that if our poor were allowed to place their bets with a Government-operated betting shop, instead of with the man on the corner, they would suddenly descend into a life of Dickensian degradation. There are, indeed, studies that show the opposite effect. The Greenleigh study of relief families in Chicago, for example, showed that gambling had nothing at all to do with their problems; lack of education, yes; illness, yes; lack of jobs and decent housing, yes. A quarter on 327 had nothing to do with it.

There was great argument, too, in New Hampshire when that state set up its own lottery in 1963. But a study made by the University of New Hampshire of 1000 purchasers of lottery tickets showed that the average income of each purchaser was $7000, still miles above the poverty line. In fact, the effect in New Hampshire on the poor has been positive. Revenue from the lottery ($2,700,000 in 1964) has been used exclusively for elementary education.

And a 1963 survey by International Research Associates of New York City betting habits and attitudes showed that it was "the poor" who worried most about "the poor" betting the Ovaltine money on bad horseflesh. Apparently the poor are not the mindless rabble the antigambling forces (on both sides of the political fence) think they are. They don't need to be patronized by their self-appointed superiors.

As for the murky charge that gambling is somehow against everything that made America great, I offer these reminders from our short history--which, at the least, suggest that gambling is not inimical to greatness: George Washington was a steward at the Alexandria Jockey Club, bet on horse races, balloon races and foot races, and set up a lottery to build the Cumberland Road. He also drew the first ticket from the lottery that was held to finance the building of the capital city that bears his name, and did not object when the Continental Congress set up a $1,000,000 lottery to finance the American Revolution. Kings College (now Columbia) was originally financed through a lottery, as were parts of Harvard, Yale, Dartmouth, Rutgers and Princeton. Andrew Jackson was a gifted crapshooter, Henry Clay was the best poker player in Kentucky, and Benjamin Franklin was a prolific manufacturer of playing cards. The real un-Americans were those hordes of narrow-minded Protestants who took over the country in the last quarter of the 19th Century and created an iron puritanism that we still have not shaken.

That is why we are now laboring under some rather preposterous moral situations. It is apparently a sane proposition for J. Edgar Hoover to bet nine races on an afternoon at Arlington Park, while the cops can arrest any citizen for doing the same thing on the other side of the fence. It is apparently a state of moral grace if you are one of the 17,000 people who can afford to take the day off, pay the carfare, provide for lunch and get out to the race track, but immoral if you slip two bucks to a bookmaker. If gambling is legalized, at least that sort of sullied logic will be cleared from the air.

It seems to me that the desire for a Federally controlled gambling system is not utopian nonsense. There would be great difficulties at first, but the benefits would make all the trouble worth while: The personal income tax would be reduced, respect for the police, and law, would increase, and organized crime would lose its operating capital and die.

So much for theory and argumentum; how might legalized gambling work out, what would the mechanics of it be?

For openers, the first thing that should be done is for the Government to set up a series of centralized betting offices in every city of over 50,000 population in the country. The employees would all be Federal civil servants, chosen after careful examination of their backgrounds. Even if a man has convictions for bookmaking or running policy, he should have a chance to prove his worth either on the job or before a board of inquiry, to determine his basic honesty.

These betting offices would be located at least 500 feet from any church, liquor store, welfare center, school or other establishment whose business might be affected. Citizens under 21 would be barred from the premises, except for men in the Armed Forces (under the theory that if a man is old enough to die for his country, he should be allowed to bet on a horse).

Drunks and other disorderly types would also be barred, and some sort of house limit would be established, to alert those in charge to the possibilities of betting coups. All the action would be handled electronically, and all pay-offs to winners would be made the following day, to prevent crowd scenes in the betting offices.

The main action handled in these offices would be off-track betting on horse races, the purchase of football and baseball pools, and purchase of tickets for the national lottery.

Since 90,000,000 people might be betting on any given day, and a longshot winner could possibly break Fort Knox, I suggest that the country be divided into betting regions, corresponding loosely to the breakdown of the Federal Reserve system. A man could bet a horse at any track within the region, and all of his bets would be automatically fed into the totalizator at the track, so that all pay-offs would correspond to track odds. All money bet on horses should be roughly broken down this way: 30 percent to the Government, 15 percent for administrative costs, 5 percent to the owners or tracks and stud farms to ensure a continuing supply of good horses, despite a probable decline in attendance at the tracks. The rest would go back to the players in winnings.

Many horseplayers operate on credit. In New Zealand, for example, you can deposit £100 with your off-track bookmaker and do most of your betting by phone until that £100 is exhausted. In England, where a man's word is apparently better than the word of a tap-out in San Diego, you simply place your bets by phone with your own personal bookmaker and pay the bill each week.

We could probably devise a combination of both. We should have the option of depositing cash in an account and betting against it or of simply charging our bets on an American Express, Diners' Club, Carte Blanche or any other credit card. Since one of the great advantages the illegal bookmaker has is the extension of credit, a system of credit is a must.

There seems no reason why a system of football and baseball pools could not be set up here, since such pools now exist in every European country, including Hungary, Poland and Czechoslovakia. In England, most of this business is handled by mail through reputable licensed bookmakers, such as Ladbroke's, and the amount of money bet is enormous ($280,000,000 in 1965). One could bet as little as a penny a team, so that on a given week, betting every possible baseball game, one's investment would not be more than a few dollars. There are 1620 major-league baseball games played every year, and the money on football pools alone could be in the billions. The prizes would be enormous, too, so the bettors would get a good percentage of money back. There could be various types of pools: straight wins, number of runs scored, team batting averages, etc. Football would be more on the European model. You would have to pick the highest possible number of wins and ties in one variation; you could bet home teams in another, visiting teams in a third.

On special bets, such as on elections, World Series, championship fights and the Indianapolis 500, special departments would be set up and professional odds setters employed. This is done every day in England, without a taint of scandal; and in Italy, they even make book on the candidates for Pope.

Basketball does not get much action these days, in the wake of the point-shaving scandals, so the Government could make the odds so tiny and the profits so minimal that no action would be handled. The same applies to the ordinary boxing match and other sports.

The lottery should really provide little trouble. There could be a monthly lottery in every region, weekly lotteries in each city where tickets are sold, and one monster lottery each year, perhaps on the Fourth of July. There is no earthly reason why Americans have to buy two thirds of all tickets for the Irish Sweepstakes, thus contributing to the balance-of-payments problem, when they could have a lottery of their own. Prices could be as low as 25 cents for fractions of shares to four dollars, and the New Hampshire system could prevent fraud, counterfeiting and other problems. (In New Hampshire, the customer pays three dollars for a ticket, pushes a button on a machine and writes his name and address on a portion of the ticket that appears in a window of the machine. He gets an acknowledgment but no receipt, because receipts could be counterfeited. The acknowledgment can be lost or thrown away and if he has written his correct name and address, he still gets paid.) If each of the 90,000,000 gamblers in the country bought one four-dollar ticket on each of the weekly, monthly and annual lotteries, the gross at the end of each year would be 23.4 billion dollars, of which the Government's minimum share should be 30 percent, or seven billion dollars. Plow that money into decaying cities and the slums might be gone in ten years.

If every one of those 90,000,000 (which is a conservative figure, according to Scarne) bet four dollars a week on the pools (either baseball or football), the gross would be 18.7 billion dollars, of which the Government's share would be 5.6 billion dollars. And if each made two two-dollar bets a week on a horse, you would add another 5.6 billion dollars, for a total from lotteries, pools and off-track betting of 18.2 billion dollars.

And so far we are just beginning to get going. There seems no reason at all why Las Vegas should have a monopoly on casino business and why Americans must travel to London to gamble in a private club. Clearly, Government-operated casinos could, and should, spring up all over the country. Some sites are readymade: Miami, the Catskill Mountains in New York, the Pocono Mountains in Pennsylvania and the ski country in New England, and other resorts and resort areas nationwide. This is where a cardplayer with illusions of being James Bond could pass a weekend, where people from local communities could save the fare to Vegas or London and spend it closer to home in casinos with all the blandishments of Las Vegas. The tax, or the Government's share, would come from gross receipts, and the percentage would necessarily be higher than that from pools, lotteries and off-track betting, because of higher costs. In 1965, Las Vegas reported gross play of 3 billion dollars. Multiply this nationally by a very conservative 10, and you have 30 billion dollars. If the Government's take is a third, you have another 10 billion dollars.

The casinos, of course, would be the most difficult to police; but there are ways to do it. For one thing, simply assign enough men to the counting rooms every night to prevent "skimming," which drains several untaxable millions out of Vegas every year. Pay these men enough, rotate them, and there would be a minimum problem of control.

The best advertising should be the facts that the pay-offs are made promptly, that the money is for real and, best of all, that all winnings are tax-free.

If the Government takes its 30 percent off the top, from the gross, the winners should not be expected to pay an additional tax. That is the system in use in England, and it works.

It seems clear that a system of legalized gambling, under strict Government control, would be not only possible but desirable. To sum up, the benefits world be major:

1. The big-time underworld would be wiped out almost overnight. Deprived of their only financing, the mobsters would have to go legitimate (although probably not straight). Other rackets, such as narcotics and organized prostitution, would quickly fade away.

2. Respect for law and order, especially in the nation's big-city ghettos, would soar. At present, illegal gambling can only exist on a large scale with the cooperation of police departments. The man on the street in Harlem or on Chicago's South Side knows this better than anyone else in America. We cannot lecture anyone on his methods of protest when the only agent of organized society he encounters is the corrupt cop.

3. A large number of Americans who are now technically outlaws would be brought into the main stream of the society. Some 1,000,000 people, now employed in the business of gambling, do not pay taxes. But if a numbers runner could be made a Federal civil servant, his life would be stable and more productive. And society would be healthier.

4. Our hypocrisy content would be slashed drastically. This, of course, is no benefit that can be measured on a chart. A great nation cannot afford to present one face to the world when its true posture is radically different. Americans like to gamble. To believe that laws can regulate their choice of personal pleasure is hypocrisy. Almost every other civilized country has legalized gambling.

5. Most important of all, legalizing gambling alone would reduce our present heavy personal income taxes by more than half. We could in one stroke restore a great deal of personal incentive to striving Americans, and a healthy attitude toward government, in the place of cynicism.

6. Finally, even if the revenues obtained from legalizing gambling were not applied toward a total abolition of the personal income tax, although that is the best use, we cannot afford to give away tens of billions of dollars a year to organized crime. Any other positive use for that money is better than the present situation.