12 Percent Gambling Tax 'Ridiculously Low' - Saturday 12th of March 2005
An expert on gambling tax laws in other states calls a proposed 12.5 percent "take" on table gambling revenues in West Virginia "ridiculously low."
Jeffrey C. Hooke is managing director of Hooke Associates, LLC, an investment bank based in McClean, Va., and is the chairman of the Maryland Tax Education Foundation. Hooke also has been a director of Emerging Markets Partnership, a principal investment officer of the World Bank Group, and an investment banker with Lehman Brothers and Schroder Wertheim - two well-known New York securities firms.
Hooke's first observation is that West Virginia's proposed table gambling laws are modeled after those in Nevada and New Jersey, where many gambling casinos compete against each other for customers. Legislation currently being considered by Mountain State lawmakers would permit table gambling only at the state's four racetracks if voters in their respective counties approve it by referendum.
"Look at what is charged in the other states," Hooke said. "It's a lot higher.
"They (West Virginia legislators) are basically giving away a monopoly to the racetracks. (West Virginia) is more comparable to what has been done in Illinois, Michigan or Iowa. Those states all charge higher tax rates, and all their casinos are making money. Nobody is shutting down."
Last year in Michigan, the wagering tax paid by casinos - three of which are located in Detroit - was raised from 18 to 24 percent, according to information from the Michigan Gaming Control Board.
In Indiana, casinos are subject to either a flat rate wagering tax of 22.5 percent, or they may opt to participate in a second "flexible system," reports the Indiana Gaming Commission. Under the later system, the smallest casinos would pay a 15 percent tax, while those grossing more than $150 million would pay 35 percent.
Small casinos in Iowa pay a 5 percent tax on their first $1 million of revenue, and 10 percent on the next $2 million, according to information from the Iowa Racing and Gaming Commission.
The amount then goes up considerably for casinos taking in more money.
Casinos on "excursion riverboats" in Iowa pay a flat 22 percent tax. Racetracks with casinos making up to $100 million annually also pay 22 percent, then 24 percent on funds exceeding this amount.
West Virginia currently taxes revenue from video lottery machines at 43 percent.
"I think they can make even more at a rate of 60-65 percent," Hooke said. "These games would still be very profitable for the (Mountaineer Race Track and Gaming Resort)."
Supporters of the table gambling legislation in West Virginia point out that casino games are more "labor intensive" than video lottery machines, and the costs for the racetracks for table gambling would exceed those for slots. Card dealers and security personnel would have to be hired.
"That is highly true," Hooke said. "But the flip side is that they will have more revenues per game. Instead of putting a quarter into the machine, people will be betting $5, $10 or $100 at a time at the tables. The bets will be much higher."
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