Monday, May 2, 2011

Lawmakers Propose New Tax on Casinos

Posted By on Mon, May 2, 2011 at 3:01 PM


More news has come out recently from the front lines of the state’s shiny new gaming industry, where a push-pull is developing between Governor John Kasich and casino developers.

Since taking office, the governor has been pretty microphone-friendly with the opinion that Rock Gaming and Penn National jaked taxpayers when they wrote the 2009 legislation legalizing gaming in the state. For the amount the two outfits stand to earn with the four casino projects, the governor feels the companies should pay more. The developers have shot back that they’re forking over plenty to create a new, cash-hearty industry from scratch. But regardless, Kasich has thundered he’s interested in finding ways to get more money off the casino business for Ohio’s black-hole budget.

We might now know what Kasich has in mind.

Last Thursday, Republican lawmakers tagged an amendment to the state’s budget proposal that would tinker around with the taxes casinos pay, according to the Columbus Dispatch. This is a dense thicket of info, so bear with us:

Under the current legislation, each casino developer must pay a $50 million licensing fee per project, invest at least $250 million in each property, and pay a 33 percent tax on gross revenue (in casino speak, that means total amount wagered, minus winnings going back to gamblers). Each site is also required to pay the state’s commercial activity tax, which in this fine print is 26 cents for every $100 in gross gambling revenue.

But the recent amendment shuffles the deck by changing the commercial activity tax to gross receipts, or money wagered. That’s not standard industry practice and developers say this change would cost them “tens of millions of dollars.” They also say it’s unfair because this tax set-up taps cash that technically doesn’t exist in any concrete, milk-money kind of way. Penn National’s senior VP Eric Schippers explains to the Associated Press “receipts that include winnings aren't a fair reflection of what a casino makes”:

"For example, let's assume a customer puts $10 in a machine and eventually gets the original $10 up to $1,000 in winnings before ultimately cashing out his or her original $10," he said in a statement. "Under this scheme, we would be forced to pay the (commercial activity tax) on the $1,000 — money that never existed in any rational person's definition."

“Rational” is the adjective to keep in mind here. Already, in the legislative session’s relatively short span, lawmakers have proven they’re more than willing to go to bat for bills that raise eyebrows, heartbeats, and questions about the mercury count in Columbus’ tap water.

Obviously, the casino developers are not happy with the proposal; Penn National has suggested it may scale back its projects. Legal challenges are rumbling off in the distance. The budget isn’t due until the end of June and there’s no telling if this proposal will live out the day or crash in a hail of outrage. We shall see, sports fans.

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