Almost as an afterthought, officials in the District and Prince George's County have decided to tap the video game industry as a major source of revenue.
Defender, Tempest and Pac-Man may be great sources of fun for those who frequent the video arcades but they're also potentially lucrative sources of revenue, as District and Prince George's County officials have discovered belatedly.
And now that they have, some officials in the two jurisdictions seemingly are trying to make up for lost time by imposing a heavy tax burden on operators of the coin machines.
That approach could drive small operators out of business or force some operators to raise the price of a game from a quarter to 50 cents. Worse, it could trigger a shift to illegal backroom operations.
Lawmakers in the District and Prince George's County have proposed licenses for every machine and taxes on the gross receipts from each at varying rates. The problem, however, is that nobody knows how many machines there are in the respective jurisdictions.
After guessing that there were about 1,000 video games in the county, Prince George's officials have revised their estimate upward to 6,000 machines. And based on further estimates of the weekly gross of a single machine, Prince George's County residents drop more than $31 million in quarters annually into video games.
Although D.C. Council member Jerry Moore has proposed raising the video game tax from 5 percent to 10 percent, nobody in the District government really knows what that would mean in tax revenues. That's because nobody knows how many machines there are in the city. Moreover, nobody knows how much the average machine grosses.
Industry spokesmen say a machine, depending on its location, can take in from $100 to $1,000 a week. Apparently nobody has thought to trace the locations of those machines through distributors who serve operators in the area.
Conceivably, an enterprising homeowner could put several coin-operated machines in the basement and pull in a tidy sum without the knowledge of government officials. "You could have one in your house, and we wouldn't know about it," acknowledged County Council member Floyd Wilson.
Wilson, however, has introduced a bill that promises to get a handle on the number of machines and will net substantial revenue for the county without causing hardship for small businesses. A measure that had been introduced previously in the county council would increase the tax take from 2 percent to 10 percent of an operator's gross receipts. However, Wilson proposes licensing each machine and keeping the 2 percent tax on gross receipts.
He estimates the county's take from taxes and licensing of the machines will be $695,000 to $700,000 annually. But that figure could jump substantially if the proliferation of the machines in the past two years is any gauge. Baltimore, for example, has about 10,000 machines.
Prince George's County might never have considered video games as sources of additional revenue were it not for a budget shortfall that led to the recent firing of 500 teachers. Council members were trying to come up with additional sources of funding when a member of its staff suggested they might find it in the so-called Pac-Man tax.
Although the Prince George's council can't approve funding for line items in the budget, it can recommend the Pac-Man tax as a source of revenue that could restore some teaching positions. "This is just an effort to get back in the budget money to prevent the loss of teachers," Wilson noted.
While the video-machine industry in the county supports Wilson's bill, the measure has received only lukewarm support from colleagues.
Given the alternatives such as a 10 percent tax on gross receipts, Prince George's could do worse. A stiff tax on receipts might well lead to skimming and wide-scale corruption.
By imposing a tax five times greater than the existing tax, "All you're doing is encouraging dishonesty," Wilson says.
"I don't think the government should get involved in a joint-venture business with businessmen," says John A. Lally, a Prince George's County lawyer whose firm represents several machine operators. "The county would share in the profits but wouldn't be taking any risks."
A 10 percent tax on gross receipts, Lally maintains, would place undue hardship on the small businessman. Under Wilson's bill, he added, everybody would pay their fair share of taxes and license fees.
"The county needs some money," Lally said. "This may be an industry with an extra pound it can have, but come after us equitably.".