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The opening of Toledo’s Hollywood Casino earlier this year is another in a series of drains on Indiana’s revenue from gambling sources.

Diminishing returns

Last month’s revenue forecast predicting Indiana’s casino tax will bring in $42 million less by 2014 should come as no surprise, considering all the competition Hoosier casinos face. State legislators and policymakers should resist the urge to chase revenue by expanding gambling. Instead, they should work to wean the state toward lower expectations of gambling revenue.

A state-sanctioned casino in Toledo and the opening of a Cincinnati casino will surely eat into revenue Indiana now gets from Ohioans crossing the border to play slots, cards, dice and roulette, especially in southeast Indiana. Native American-operated casinos in Battle Creek and New Buffalo, Mich., have already siphoned money away from Indiana’s northern casinos. Plus, more casinos could well open in the new few years in Chicago and in Kentucky.

That’s not the only competition. Casinos will also be fighting another state-sanctioned form of gambling as Indiana’s Lottery Commission has contracted with a vendor to reach higher revenue targets that can only come from selling more lottery tickets. If successful, Hoosiers will have fewer dollars to spend elsewhere, and casinos will likely be among the losers.

Already, state Sen. Luke Kenley, the Appropriations Committee chairman, said lawmakers should back legislation to make state casinos more competitive. And pressure to move one of the two side-by-side casino licenses in Gary will return, with some lawmakers very likely targeting northeast Indiana – the only corner of the state without a casino – while others will insist the license remain in Lake County.

But Kenley, R-Noblesville, rightly notes that Indiana’s gambling revenue has probably peaked and will never return to the pre-competition levels.

Casino gambling – like racetrack gambling and the lottery – has been a pain-free way to increase state government’s revenue, especially because much of the money came from out-of-staters. But with casinos either open or likely in Illinois, Michigan, Ohio and Kentucky, Hoosiers will be expected to wager more. And as a “voluntary” tax, gambling is a poor option, with revenue levels swinging wildly and the burden falling heavier on people of lower incomes.

Just as a losing gambler unwisely panics and doubles down, increasing his losses, Indiana lawmakers have time and again addressed money woes with more gambling. First the lottery. Then racetracks. Then riverboat casinos. Then dropping the whole “riverboat’ requirement. Then bailing out racetracks by letting them add casinos.

Now it’s time lawmakers realize that not just Indiana but the Midwest is near the saturation point on gambling and that the state’s best option is to adjust to a permanently reduced revenue flow with spending cuts and/or other tax revenue.