Low casino tax eyed in budget talks

JACKSON – Mississippi’s casino tax, one of the lowest in the nation, could enter the discussion as legislators look for ways to generate revenue in another tight budget year.
According to the state Gaming Commission and the American Gaming Association, Mississippi has the fourth lowest tax rate among the 13 states that regulate casinos.
No one is saying for sure whether efforts will be made to turn to the casino industry for additional revenue during the 2011 session, when the Legislature will be struggling with possible deep budget cuts during an election year.
But many have speculated that efforts would be made to find new revenue sources, such as higher fees for providing certain government resources.
“I think a number of things need to be on the table as far as additional revenue,” said Rep. George Flaggs, D-Vicksburg, who argued during recently completed Legislative Budget Committee meetings that education, health care and public safety could not afford additional cuts.
“We are to the point where we are affecting the quality of life,” Flaggs said.
When asked if casino taxes should be on the table, Flaggs said it is too early to discuss specifics. The 2011 session begins in January.
But cigarette tax hike advocates finally prevailed after a multi-year fight in part by making the argument that the tobacco tax in Mississippi was substantially below the national average.
A similar argument could be made about casinos.
For instance, according to comparisons provided by the state Gaming Commission during the recent budget hearings, Mississippi generates significantly less in revenue on its casinos than many similar-sized states.
In calendar year 2009, Mississippi casinos generated $2.5 billion in revenue and paid $295 million in local and state taxes.
During the same period, Louisiana casinos generated $2.4 billion in revenue and paid $598 million in taxes; Indiana casinos generated $2.7 billion and paid $838 million in taxes.
Mississippi’s tax rate is 12 percent of gross revenue with 8 percent going to the state and 4 percent directed to the county where the casino is located.
Mississippi currently has 30 casinos. Indiana, home to 13 casinos, has a graduated tax rate between 15 and 40 percent of gross revenue, plus a $3 per person admission fee.
Louisiana, with 18 casinos, has a tax rate of 21.5 percent of revenue on riverboat operations and 21.5 percent or $60 million – whichever is greater – on land-based casinos.
According to an American Gaming Association report, only Nevada and New Jersey, the two largest casino states, and South Dakota have lower tax rates than Mississippi. The AGA reports lists 13 states with state-run casino operations.
The tax rate is as much as 7.75 percent of revenue in Nevada and up to 9.25 percent in New Jersey. The tax rate in South Dakota is 8 percent of revenue plus $2,000 per machine per year.
Some legislators talk about the need to raise additional revenue to counteract the unprecedented drop in state tax collections and the resulting budget cuts. But they are reluctant to go too far out on a limb in an election year.
“There is no doubt we are at a crucial time in the state,” said Rep. Steve Holland, D-Plantersville. “We are either going to have to find additional revenue or cut into the bone marrow.
“The political reality is that we are probably not going to raise anything. However, I do think it needs to be a subject of debate to look at revenue sources.”
Rep. Brian Aldridge, R-Tupelo, said he would be willing to at least consider changing casino tax rates.
“I would be willing to put that on the table as something to look at,” he said. “I am not promising I would vote for it. But I am more than willing to look at it.”
But Republican Gov. Haley Barbour indicated that when it comes to raising taxes, there is nothing to look at.
“Raising taxes when the economy is struggling across every sector will only hamper any recovery we might see,” the governor said. “I do not support raising any taxes, particularly those that will result in fewer jobs and less investment in Mississippi.”
Mississippi approved casino gambling in 1990 and put the current tax rate in place then. There has been reluctance to change that tax rate or make many major changes in the governance of casino gambling, in part because of the unexpected success of the casinos in the state.
The state-run casinos, by law, are located either along the Gulf of Mexico or the Mississippi River.
According to the AGA report, more than 25,700 people are employed by the casinos in Mississippi.

Contact Bobby Harrison at (601) 353-3119 or bobby.harrison@djournal.com.

BOBBY HARRISON / Daily Journal Jackson Bureau