Michael Wickline, the Arkansas Democrat-Gazette’s veteran Capitol correspondent, produced an excellent and comprehensive report today on casino revenue in the new world of expanded Arkansas casino gambling.
I would have been inclined to put higher in the story his findings on the bottom line.
Wickline led with the $5.2 billion in gross betting at Oaklawn Park and Southland Park casinos in the fiscal year ended June 30, nearly 10 times the gross amount bet on the Arkansas Lottery.
Well, sure there’s a big difference. You can feed money through a slot machine a whole lot faster than you can buy and scratch lottery tickets at Doublebee’s. This is precisely why lotteries in other states (and the desire lurks here) have added video lottery terminals and keno games. They mean much more betting and, in the end, a much higher tax take.
Arkansas, meanwhile, has cut the casino gambling tax. Enormously.
Amendment 100, in addition to allowing the establishment of new casinos in Jefferson and Pople Counties, dramatically cut taxes on the two existing casinos, in addition to firmly legalizing them for the first time and authorizing every form of casino gambling including table games and sports bookmaking. There’s no longer a need to promote the fiction that the machines already jingling were “electronic games of skill.”
How did backers of two new casinos get Oaklawn and Southland to go long with new in-state competitors? Easy: Gambling expansion and the huge tax cut that should help cover the note on borrowing for casino and hotel expansions underway at both tracks. (Dog racing at Southland must continue under the amendment, but it is a nearly dead “sport.” Thoroughbred horse racing has problems nationally, too, but the Cella family have maintained a top horse track.)
The most interesting part of Wickline’s article — to me anyway — came about three dozen paragraphs down.
It explains that, before Amendment 100, net wagering revenue on casino gambling at Oaklawn and Southland was subject to an 18 percent state tax, plus 1.5 percent for the city and .5 percent for the county — more than 20 percent in all.
Under Amendment 100, the total tax drops to 13 percent on the first $150 million in net receipts (the amount left after paying winnings), and 20 percent on net above that figure. Some of that revenue is then diverted to the cities and counties in which the casinos operate, but there is no separate levy..
The new scheme took effect in August and Wickline reports it was a bonanza. The state collected $2.5 million in gambling tax, a drop of $3.1 million, or 54.9 percent from a year ago. Projections are that the state will collect about $31 million in tax revenue this fiscal year against almost $70 million last year. A $39 million tax cut for the wealthy families that own Southland and Oaklawn is not chump change.
With expanded gambling at Oaklawn and Southland and the eventual arrival of new casinos — the Quapaws expect to begin slot machine gambling soon in Pine Bluff — the state expects growth in casino tax revenue to $55.9 million in fiscal 2021, still far below last year’s tax take.
The state government as a whole is a bigger loser. The law caps the state general revenue share of casino taxes at $31.2 million a year, with overage going to highways. Yes. The legislature decided that the best way to pay for damage done to interstates by truckers is to divert slot machine revenue. This has a damaging side effect. Where support of general state services was $70 million last year, and could have risen, it’s now capped at $31.2 million. That loss of general revenue will have to be made up either in new taxes or — more likely — by squeezing state services.
Somewhere around 2027 or so, total revenue from gambling will exceed what was realized last year before the Amendment 100 tax cut for Oaklawn and Southland. But state general revenues will still — and forever — be a loser.
PS: I overlooked a point worth elaboration. The taxation of existing casinos continues a charge on the take that goes into purse funds at the two tracks, where parimutuel wagering exacts only a tiny tax. The purse fund amounts to a huge subsidy for Southland, a total likely greater than purses and wagering on the justifiably declining sport of dog racing.