Dan Carden, Times of Northwest Indiana
dan.carden@nwi.com
INDIANAPOLIS | The house always wins at the casino, but gambling taxes mean Indiana's state and local governments win big, too.
A new analysis of state gaming revenue finds Indiana casinos pay on average one of the highest effective tax rates in the United States -- 38 percent.
"Nobody else pays taxes like we do," said Mike Smith, president of the Casino Association of Indiana. "Before you pay that first nickel of expense, 40 cents is gone from that dollar right off the top."
Indiana riverboat casinos pay wagering taxes of between 15 and 40 percent on money bet on the floor and pay $3 to $4 for every person who walks through the door.
Casinos also pay on "local development agreements," deals cut when the casinos opened that kick back a percentage of the revenue directly to local governments. In Lake County, LDA payments for the July 2008 to June 2009 state fiscal year totaled $45,230,336.
Added all together, the combination of wagering and admission taxes and LDAs topped $1 billion in fiscal 2009, which means that Indiana casinos are paying higher taxes than any other state in the Midwest, according to a state report.
Locally, Horseshoe Casino in Hammond pays a 40.2 percent effective tax rate, above the state average of 38 percent. East Chicago's Ameristar pays 37.5 percent; Michigan City's Blue Chip pays 32.2 percent, and the Majestic Star casinos in Gary pay an average of 30.3 percent.
Casinos in neighboring states pay far less.
In Illinois, the effective tax rate is between 20 and 36 percent. It's 21.2 percent for Detroit casinos and only 3 percent at Michigan tribal casinos.
Smith says it comes down to deciding what kind of business model the state wants to have.
"The lower the tax rates, the better you're going to spur capital investment," Smith said.
As a result of Indiana's high gambling taxes, it's often less profitable for casinos here to expand, because they'll just end up paying more money in taxes, Smith said. However, that didn't stop Horseshoe from launching a new $485 million Hammond casino a year ago, nor did it block the $130 million, 22-story hotel Blue Chip opened in February.
But the owners of Indiana's two casinos at horse racing tracks in Anderson and Shelbyville, which opened just last year, already have told state lawmakers they'd like lower taxes. The racinos pay a combined effective tax rate of 46.2 percent.
But cutting casino taxes would be tricky.
Gambling tax revenue, which makes up about 7 percent of the Indiana's annual budget, is the third-largest source of state revenue behind income and sales taxes. Cutting casino tax rates likely would mean cutting state services or hiking taxes on something else.
In Northwest Indiana, Gary is using casino revenue to keep the lights on as it tries to balance its budget following a change in property tax rates. In Hammond, city department heads have resorted to begging for money from city council members, who each control a portion of Hammond's casino cash.
A state legislative study committee has been meeting to consider changes to Indiana's gaming laws in light of potential competition from surrounding states.
Don Barden, the owner of Gary's Majestic Star, says Indiana should be doing everything it can to help its casinos.
"It's time for the state to look at maximizing its assets in the gaming industry," Barden told the committee. That means accepting that casinos are here to stay and making Indiana casinos as welcoming as possible, he said.
For Barden, that means allowing him to replace his two Lake Michigan boats with a land-based casino near the Borman Expressway. Making that change still requires legislative approval.