A Primer on the Gaming Tax

And another thing. Aaron is one of my favorite local bloggers, and I often agree with him. But I'm afraid he's buying into the 'party line' on the gaming tax.

How are casinos taxed? Well, let's walk through it. If you put $10.00 in a machine, and collect $5.00, the casino has gross revenue of $5.00. Of the owner's gross revenue, the owner pays a flat 15% off the top in gaming tax. Think about that, businessmen, take 15% off of your gross revenue before you pay a penny of your fixed and variable expenses.

Then, after you pay your employees, rent, bank payment, etc., etc., etc., you are taxed again. Yup, you pay your state and federal income taxes. And your property taxes. Oh yeah, don't forget your annual gaming and liquor license taxes, nor your annual machine permits. Undertaxed? Hardly.

Most operators will tell you that the state gaming tax is their largest business expense. Larger than payroll. Think about that, folks, their largest expense is one of their taxes. In many cases, operators pay more in gaming taxes than they earn in net profits. It doesn't take a rocket scientist (or a media sponsored mayor) to figure out that if you double that tax, there's no income left. And you know what, that suits our mayor just fine, because he's not about fair taxes, he's about getting rid of gaming. (Except when he's posing with the Tavern Association to accept their check to the BRAC committee.)

Aaron also talks about the 'true cost of gaming.' This is a favorite, with local zealots such as Ben Forsythe making things up as they go. Hopefully an industry representative will step in and help me here, but for now I have to go on memory. Several years ago the FEDERAL GOVERNMENT conducted a comprehensive, cross-community study about the true costs of gaming. Great Falls was one of the communities studied. The conclusion? No significant detrimental costs in excess of the revenue produced. Anyone besides me remember the Tribune article? That's right, they essentially ignored the findings of the study to publish local 'experts' observations to the effect that they disagreed with the findings.

By the way, the state set up a gaming hotline, but never funded it. Guess who did? The tavern owners.

So you might be able to guess why I am not anxious to give away any more of my money to the Einsteins who gave us the Waterpark, the broke swimming pools, and the Lewis and Clark Signature Event. And do you really question whether Mayor Gray has been in office too long when he couldn't make two public statements (the Mayoral forum and today's article) without suggesting two new tax increases? He's got some great ideas for our money.

Is this about whining for the 'poor' casino operators? No. But people with agendas should be distrusted, and the rest should get their facts straight before they attack their neighbors. It might be your industry next.


Treasure State Jew said...


No one with any conception of reality would argue that casinos do not pay a significant percentage of their gross in tax. As well they should, since they owe the government for creating a fictional piece of paper that is their most valuable asset.

Of course, I am talking about the liquor license. By creating an artificial shortage of these documents, the government has ensured that their value surpasses the ridiculous. In return for creating this liquor license system, the government got the tavern owners to agree to very high taxes. A Faustian bargain, to be sure; but one that is a fact in our State and local economy. I have not advocated (and will not advocate) changing this relationship.

However, like our disagreement about zoning, I think it very important to take a look at the rules of the game. If one chooses to do business in a highly regulated industry, then one has to deal with government interference.

When I talk about the true cost of gaming, I have no figures to back up what I am saying. However, I have plenty of anecdotal experience. Great Falls is beginning to have the problems of a big city. Most people in Great Falls either know someone that has a family member or knows of someone in another family that compulsively gambles and has caused that family financial hardship.

Go to the bankruptcy court in Great Falls, and listen to the cases. It is amazing how many of those personal bankruptcies are caused by compulsive gamblers.

More than that, look at the amount of embezzlements that Great Falls business have to suffer. It has been my experience that many of those embezzlements are caused by people trying to pay off either their own gambling debt or that of their spouse.

In both cases, either through customer's taking personal bankruptcy or trusted employees resorting to embezzlement, it is small businesses in Great Falls that end up paying the tab when they are victimized by compulsive gamblers.

That is a burden, and one that should be recognized.

Anonymous said...

Because of the current trend of comparing gambling addiction to chemical addiction in courts I'm not sure how accurate the stores connecting gaming to bankruptcy or embezzlement. If you claim your crime or debts are related to drugs or gambling you get more sympathy/leniency from a judge and society at large. I have had individuals in my family use their “addictions” to justify some pretty terrible behavior. Their stories sound good to those on the outside but those close to them know that the money troubles went beyond gambling or drugs. No doubt there are several real stories of gambling addicts damaging their normal lives. However, now due to a court system and a society that differentiates regular stealing from “addiction“ stealing you can’t trust the thief’s explanation for their crimes. It is kind of odd that someone who steals to feed their family is treated harsher than someone who steals to feed their habit.


Anonymous said...

A person who commits embezzlement to support a gambling habit doesn't have a gambling problem, he has a stealing problem.

GeeGuy said...

qAaron I will respond to your post in more detail later. But for now, suffice it to say that we are always amazed when we see a big time thief stealing from their employer, say to the tune of $100,000, and we've never, never seen them in one of our joints. Yet they all claim gambling now, because it tends to take the heat off them.