Gambling no jackpot for tax relief                     BY C. DAVID KOTOK AND PAUL GOODSELL
WORLD-HERALD STAFF WRITERS                          Sunday Jan. 12, 2003

 

You might think casino gambling in Omaha would be like a big Powerball jackpot win for state and local governments, a windfall that would cut taxes and solve every budget problem.    You'd be wrong.

Adding an Omaha casino to compete with the three in Council Bluffs would do little more for taxpayers than clink out a few quarters into a slot machine's payout tray. You'd enjoy the money, but it wouldn't change your life.

There's no question that Nebraska state government would collect tax revenue from casino gambling.

But the amount of new gambling tax revenue would be too small to result in significant tax relief or make anything bigger than a dent in Nebraska's current budget deficit.

Even Iowa, with about $200 million in annual revenue from its gambling tax, is struggling with an anticipated budget deficit this year of about $200 million plus an equivalent amount to restore funds lawmakers withdrew this year from dedicated cash reserves.

And Iowa's experience does not apply directly in Nebraska. Nebraska has about 1.2 million fewer residents than Iowa. And if the Cornhusker State adopts casino gambling, the rate at which it taxes casinos might be set lower than Iowa's current 20 percent rate.

"Can we get out of this problem with casinos?" said State Sen. David Landis of Lincoln, chairman of the Legislature's Revenue Committee.    "No."

The Nebraska Legislature is almost certain to take up casino gambling in the legislative session that began last week. The first of several expected measures was introduced Friday, by State Sen. Ed Schrock of Elm Creek - a proposed constitutional amendment that would permit up to eight casinos in a six-mile zone along Nebraska's borders plus one at each of the state's horse-racing tracks in Omaha, Lincoln, Grand Island, Columbus and South Sioux City.

Iowa's 13 casinos collected $960 million in gambling losses in fiscal 2002 and paid $214 million of that amount in state gambling taxes, or less than a nickel of each dollar in a state budget totaling more than $4.5 billion. The remaining $746 million in casino revenue went to other taxes and fees and to casino owners for operating expenses and profits.

A single large, successful casino in Omaha might generate as much as $29 million in state gambling taxes annually, according to estimates that Creighton University economist Ernie Goss prepared for the Greater Omaha Chamber of Commerce.

That $29 million would represent only 1.2 percent of the state's annual budget and would scarcely blunt the $673 million, two-year budget deficit that state senators must deal with in the current legislative session.

If an Omaha casino did produce $29 million a year in gambling tax revenue, the money wouldn't make a dime's worth of difference. The revenue would amount to about 8.5 cents of every dollar in the deficit.

Even if a casino had been in Omaha last year, Landis said, it wouldn't have produced enough additional tax revenue to avoid the increases in state income and sales taxes that the Legislature enacted during a special budget session last year. He said $90 million would have been needed to avoid the half-cent increase in the state sales tax - or more than three times the estimated tax revenue from a single Omaha casino.

Locally, Douglas County homeowners would have scarcely noticed the savings on this year's property-tax statement. The three Bluffs casinos are assessed for tax purposes at about $140 million, too little to have translated into significant savings when added to Douglas County's total valuation of $24.4 billion.

The owner of a $100,000 house in Omaha still would have seen a tax hike this year, but it would have been smaller - $61 instead of $73. The $12 savings would have amounted to 0.6 percent of this year's total bill.

And for the City of Omaha, a casino might have brought in an estimated $740,000 in gambling taxes, assuming gambling losses at the casino of $148 million (one estimate by Goss, the Creighton economist) and by applying the Bluffs' local gambling tax rate of .5 percent. In property taxes, Omaha would get a little more than $600,000 if its casino were worth $140 million, the value of the three Bluffs casinos.

More than five times the total of more than $1.3 million would be needed to close Omaha's current anticipated budget gap of $7 million to $9 million. Gambling does provide governments with real money.

With state government budgets facing big deficits, Nebraska is one of several states looking at casino gambling as an additional revenue source. Several states with casino gambling are considering raising gambling taxes.

Landis said the Nebraska Legislature could have used the gambling tax revenue from an Omaha casino last year to avoid some unpleasant cuts, such as restricting Medicaid eligibility.

But he and State Sen. Roger Wehrbein of Plattsmouth, chairman of the Appropriations Committee, noted that gambling revenue is notoriously unreliable. Most states, including Iowa, put the money into a special fund to finance one-time projects. Even states that depend heavily on gambling revenue to finance state government operations have not been immune from the current fiscal crisis.

William Thompson, a public administration professor at the University of Nevada Las Vegas and a leading national expert on gambling, said state political leaders who think gambling is the answer to their problems need look no farther than Nevada.  "We have a deficit here of $400 million," Thompson said.

When gambling expands across the country, the biggest winners are the gambling companies in Nevada, he said.

About $84 million in gambling taxes from the Bluffs casinos went to Des Moines last year. Nearly $81 million more was shipped to the corporate offices of the casinos' owners, Harrah's and Ameristar.

In addition, Thompson said, the money that casinos spend on slot machines - about $10,000 each -usually goes to Nevada-based manufacturers.  Governments get some extra cash and gambling companies fill their coffers from local casinos, Thompson said, before quickly adding: "It's a loser for people."

Council Bluffs gambling money

State fiscal year ending June 30, 2002.

Casinos' revenue from gambling losses: $377.3 million
• Other operating expenses (including non-gambling taxes): $114.9 million.
• Payroll: $80.3 milion. • Adjusted gross profits: $82.8 million* • Gambling taxes: $99.3 million.

Of $99.3 million in gambling taxes paid by Bluffs casinos: • State gambling tax: $84.7
• Council Bluffs gambling tax: $1.9 million
• Pottawattamie County gambling tax: $1.9 million
• Tax for treatment of gambling addiction: $800,000
• Fee paid to the Iowa West Racing Association for community betterment: $10 million

* Estimated for year ending Dec. 31 based on first nine months of 2002.

Sources: Iowa Racing and Gaming Commission, Iowa Gaming Association, Securities and Exchange Commission.

 

 
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