tax.com: Racinos Ask for Tax Break

Racinos Ask for Tax Break

David Brunori | Aug. 27, 2009 07:11 AM EST

If you want to see how whacked out our system of taxation is just look to Indiana. In June 2008, horse track owners asked the state to allow slot machines. This idea was sold as a means of 1) reviving the dying horse racing industry, and 2) raising substantial money for the state. Politicians who would rather allow gambling than impose taxes, readily agreed. The tracks have to pay a fee to provide slots, and then must pay a tax on their gross revenue. The tax is how the state was going to make its money. It turns out that even slots can't save horse racing and the tracks are losing money by he bushel. So naturally, the track owners are asking the state for a tax break. Now that is not all that surprising. Industries routinely show up at the legislature with their hands out looking for tax breaks. But the whole point in allowing the slots was to raise more tax revenue.

This is just another example of what's wrong with the system. If the public wants services -- say police officers -- it should pay for them with broad based taxes. No gimmicks. No free money.

Comments (2)

You can expect stories like this to begin popping up more and more. If/when
Ohio approves casinos and/or slot machines at its racetracks, the Indiana
racinos will be squeezed even more (since no Ohioan will have any reason to
visit Indiana, and more Indiana residents will begin placing their bets in
Ohio).

The gambling market is becoming increasingly competitive. A lot has changed
since the '80's when only Las Vegas and Atlantic City had substantial legal
gambling operations. With more competition, casino/racino profits will be
driven down, and states will hear more claims that gambling taxes and fees must
be cut to keep the state's gambling industry competitive with its neighbors'.

And really, those claims will contain some amount of truth. Current gambling
tax rates have been set with the assumption that these operations will be
immensely profitable, since they lack competitors. With more competitors, and
less profit, 30-50% tax rates will begin to become an important part of doing
business.

Gambling won't remain a cash cow forever.

Posted by Carl Davis on Aug. 27, 2009 at 09:52 AM

Ohio is going down the same path - same chapter, second verse. At the behest
of Gov. Ted Strickland, the state legislature pushed through a bill to allow
installation of slot machines at Ohio's seven racetracks. This measure was
passsed as part of the belated 2009-2011 budget. But few think that this is
going to work wonders in the revenue raising department, especially in view of
pending legal challenges. These challenges are constitutional and are aligned
with the fact that the electorate has rejected legalized gambling on four
recent occasions.

You're right... These kinds of measures, conceived to avoid risking the
political capital that comes with tax increases, instead so often backfires.
Moreover, they usually don't come close to meeting initial revenue
projections. We would all be better off in the long run to recognize that a
sales tax increase, for example, is the viable solution to state budget
problems.

Posted by Peter Miller on Aug. 27, 2009 at 10:13 AM

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