—P.J. O’Rourke
Bill Clinton had a problem after he was elected president beyond his zipper issue. He had great ambitions to launch a health reform package and needed $15 billion. His problem was a congress that was continually asking him where he was going to get the money, for the Republicans at this time were not big fans of unfunded expenditures, especially those suggested by a Democratic president and involving healthcare.
In early 1994, Clinton answered the money question by suggesting he could tax land-based casinos, riverboat casinos, tribal casinos, and racetracks. This caught all of these entities by surprise, and these folks did not like this type of surprise.
At this time, the gaming industry was somewhat fragmented across verticals, state boundaries, and tribal/non-tribal divides. The Nevada wing of the industry, a group with a chronic revulsion to efforts to increase taxes clearly understood they needed some help and they sought out this help in the form of a gentleman with roots in the state of Nevada by the name of Frank Fahrenkopf. The industry developed this thing called the American Gaming Association and handed him the reins. This was probably the smartest thing the industry ever did.
Frank Fahrenkopf had been a power in the national political scene for many decades, having associations with Republican causes dating to the 1960s. In 1983 he became chairman of the Republican National Committee and he served in this position until 1989, a tenure longer than any chair for either party in the history of such things. Moreover, six of these eight years coincided with the presidency of Ronald Reagan.
While working to support the industry, Mr. Fahrenkopf basically had a simple approach to things and it was to crush any effort to raise gaming taxes. It was his mantra, his goal, and his mission. Also, having worked in the belly of the beast at the federal level, he understood to meet his mission of no new taxes he needed to keep the federal government away from the industry for state governments were much easier for the industry to manage. He clearly understood if the federal government got its nose into gaming’s tent, there could be no looking back.
Mr. Fahrenkopf commanded enormous respect in political circles and there was not a Republican or Democrat on the planet who would not take his call. And without bold statements or pronouncements, but just working behind the scenes, gaming’s main man made sure President Clinton’s desire to finance his bill through a gaming tax would, in the spirit of Alexander Hamilton, just not have the votes. There would be no new taxes on the gaming industry and President Clinton would just have to look elsewhere to fund his desired healthcare program.
With this threat abated, another soon surfaced, and this was a bill sponsored by Congressman Frank R. Wolf (R-VA). The bill was introduced in early 1995 and signed into law by President Clinton in the Fall of 1996. It was known as the National Gambling Impact Study Commission Act and was designed to address a great many topics within the commercial and tribal gaming worlds. What is important to understand was Congressman Wolf was not a big fan of gaming. Once again, Mr. Fahrenkopf’s talents were needed.
While this was an example where the federal government had managed to legally stick its nose into gambling, therefore presenting a substantial risk to its future development, the industry did succeed in neutering this commission by deftly shaping the appointment process for the nine commissioners. While a number of personalities were involved in this endeavor, Mr. Fahrenkopf was understood to have worked real magic. The product of the commission was something of a blah-blah thing.
Frank Fahrenkopf served as the chief executive officer of the American Gaming Association for 18 years and in spite of their best efforts, the feds were kept out of the industry and there were no new taxes of significance. In essence, it was “mission accomplished” for Mr. Fahrenkopf—and this was a huge and important mission to accomplish.
It seems there has been a fair degree of mission shift in the more modern American Gaming Association.
Nevada Congresswoman Dina Titus is presently working to remove a small federal tax relevant to sports betting operations and has been joined by a number of co-sponsors. While the industry would welcome the reduction in expenses, it is not without risk.
When the federal government starts looking at changing taxes and legislation, funny things can happen. It is like someone going in for some minor surgery and coming out looking like Frankenstein’s monster. The tribes have always feared this with the Indian Gaming Regulatory Act and have opted to take what they have rather than risk a disaster if the federal government began to not just fix the faults of the Act but recraft this law. Ms. Titus may just not want to open this potential can of worms with her tax measure, but then she is a politician who possibly wants to grandstand for the home team and raise a few dollars in the process.
The American Gaming Association has also been nagging the Department of Justice to get involved in stopping the scourge of offshore betting. For some of us old schoolers, the advice is to be careful with what you wish for before encouraging the nose of the federal government into the gaming tent. You may never get that beast out of the tent.
The industry is also attracting a great deal of national and regional press attention for deceptive and excessive advertising; a willingness to talk the talk before walking the walk with respect to problem gambling; and really being stupid with things like targeting college campuses as prime betting markets. All of these issues offer ready-made excuses for the federal government to enter the fray by starting hearings, investigations, and commissions—and trust me, the federal government wants in the fray.
One of the most significant events in gaming of late that needs to be understood by the industry and its main lobbyist is that for one gaming election in one state, the industry spent almost $600 million dollars. Do you know who noticed this reality? Politicians noticed this reality. And I guarantee you they will soon be looking for a way to cut themselves in on the source of that stash of cash.
Anyone that suggests the industry’s massive incineration of cash in California was not noticed by the political world better think twice. I am convinced this was the statistic that turned ex-Texas governor and Trump cabinet member Rick Perry into a full-fledged gaming lobbyist in the state of Texas. These types of folks get bleary-eyed when they see the incredible disregard the modern gaming firms have for cash – and they want it.
The point is, don’t be surprised when the feds start holding hearings and the like to explore this or that in the gaming space. And one of their excuses will be that the states are doing such a piss-poor job of it. Power in Washington is a function of access to money—and as P. J. O’Rourke has suggested, making money available to politicians is like giving whiskey and the car keys to teenage boys.
This may explain why it was so easy for Congresswoman Titus to get so many cosponsors for her bill.
It may also explain why the industry may really miss Frank Fahrenkopf.
