Shortsighted, and a step in the wrong direction.
That’s how the gambling industry is characterizing an effort by some Maryland state legislators to raise taxes on casino revenue in the state.
A proposal last month by 21 state senators to exceed previously agreed-upon tax rates has upset casino owners and industry lobbyists.
Casinos pay 67 percent tax on revenue from slot machines and 20 percent on revenue from table games. A bill sponsored by Senate Democrats would increase the state’s tax on table games to 30 percent; the tax rate on slots would remain the same. Both rates are among the highest in the 23 U.S. states with commercial casinos.
In January, two Maryland casinos, Maryland Live and the new Horseshoe Baltimore, were given approval by the Maryland State Lottery and Gaming Control Commission to replace hundreds of slot machines with table games. A month earlier, the commission approved a request by Hollywood Casino in Perryville to dump 308 slot machines.
The casinos say the shift is a necessary response to consumer demand as fewer players head to slot machines and more want to gamble at table games such as blackjack, roulette and baccarat.
But some legislators see the move as a way for the casinos to pocket more revenue and avoid the higher tax rate on slot machines. The bill, introduced by Sen. Joan Carter Conway (D-Baltimore) and co-sponsored by 20 senators, is awaiting a vote in the Senate Budget and Taxation Committee.
“I love that bill. I love it, I love it,” Conway said in a phone interview. “If they vote it, will it get out of committee? I think it will. I don’t know one senator who is opposed to the bill.”
Conway says she introduced the bill because she’s worried that as the casinos dump slot machines and add table games, the difference in the tax rates will limit the revenue for the state, the vast majority of which is directed to the state’s Education Trust Fund.
Slots produced $578 million in tax revenue for Maryland in fiscal 2014. Table games earned $255 million for the state that year.
Conway’s bill immediately drew attention from the casino industry, which pushed back with force against the proposed hike and testified against it in committee hearings.
“We’ve been working really hard to ensure that the legislators have all of the facts about what a 50 percent increase on the tax on table games would mean to the industry and what it would mean to the state and how it would negatively impact the revenues that would be returned,” said Sara Rayme, a spokeswoman for the American Gaming Association, a casino lobbying group.
Casino operators see the proposed legislation as a move that would make Maryland less competitive and less attractive for additional investment, particularly in comparison with other states in the Mid-Atlantic and Northeast, Rayme said.
Many in the casino industry already think that the Maryland tax rates are too high and that the industry is overregulated in the state.
That argument doesn’t win much sympathy from Conway.
“If you think we’re overregulated, if you think the taxes are too high, you were very cognizant of that when you were busy bidding for casinos in the state of Maryland and you wanted to be here,” she said, answering casino owners’ concerns. “And with all that said, you’re still making money.”
Since casinos began operating in Maryland in 2010, they have taken in approximately $2.4 billion in revenue and have contributed approximately $1 billion to Maryland’s Education Trust Fund.
Whether Conway’s bill is brought up for a vote is undecided, but Sen. Edward J. Kasemeyer (D-Baltimore and Howard counties), who heads the Senate tax and budget committee, expressed caution.
“You don’t want to be making a decision willy-nilly,” he said in a phone interview. “Whatever’s done will need a lot of homework and preparation so that everyone is well aware of all the facts and figures before you make a decision. It may be an issue to really put in some comprehensive study, maybe after National Harbor opens, to see how the numbers look.”
The $925 million MGM National Harbor casino, the state’s sixth casino, is scheduled to open next year in Prince George’s County.
Waiting until the MGM casino opens before changing the tax rate is favored by Del. Eric G. Luedtke (D-Montgomery County), the House chairman of the Joint Committee on Gaming Oversight.
“Certainly after all the casinos are online and we have a better idea of what the market looks like in the state, then we’ll have a better idea of what the appropriate tax rates are,” he said. “The casinos are going to advocate for their own interests, but it’s our job to consider the state interest. I expect it to be an ongoing conversation.”