States' Casino Tax Revenue Tops $7 Billion


If someone asked you which state took in the most money from casino gambling taxes last year, you probably wouldn't have to think very hard. You'd say it has to be Nevada. But you'd be wrong. Nevada didn't even come in second.

The champion, a new report shows, was Pennsylvania, which led all states in direct gambling tax revenue with $1.3 billion.

Indiana edged out Nevada for second place with nearly $875 million. The report was issued by the American Gaming Association (AGA), which represents the commercial casino industry. It found that total tax revenue brought in by casinos around the country was more than $7 billion in 2010, a significant increase from the two previous years.

Nevada can still lay claim to being the nation's leading casino state, with a total take of $10.4 billion last year, but casino revenue and casino tax revenue are two very different things. State tax policies for casinos vary widely. Tax rates often are higher for casinos located at racetracks, sometimes called "racinos," where the slot machines tend to be operated by the state lottery as opposed to the more traditional state regulatory gaming commission.

Nevada doesn't have any racinos. It has 256 commercial casinos, but it imposes a comparatively low rate of up to 6.75 percent in taxes on the money they take in. Pennsylvania, on the other hand, has only 10 casinos, but it applies a 55 percent tax rate on the more than 26,000 slot machines at those casinos. Of the proceeds, 34 percent go to the state gaming fund, 12 percent to the horse racing industry, 5 percent to economic development and 4 percent to local governments. Pennsylvania has a 16 percent tax on table games.

Indiana also taxes at high rates: It has a graduated tax of 15 to 40 percent of gross gambling revenue for riverboat and land-based casinos, and a graduated slot tax of 25 to 35 percent of gross gaming revenue for racinos.

Bouncing back

Top ten casino tax states, 2010
Pennsylvania $1.3 billion
Indiana $875 million
Nevada $835 million
Louisiana $572 million
New York $503 million
Missouri $486 million
Illinois $466 million
West Virginia $378 million
Michigan $311 million
New Jersey $306 million
Source: 2011 "State of the States," American Gaming Association

All told, commercial casinos provided $7.6 billion in tax revenue for the 22 states that operated them last year, including casinos at racetracks, on riverboats or at Las Vegas-style venues. That marked an increase of 3 percent from the previous year, the AGA said. It was also more than three times the $2.5 billion the industry provided in taxes to states and localities in 1998.

The AGA reported that Florida and Oklahoma saw the largest increases in gaming taxes last year, while New Jersey, dependent on casinos in Atlantic City, saw the biggest decrease, losing 12 percent, largely because neighboring Pennsylvania and Delaware added their own table games in 2010.

"Atlantic City got hit by bad luck," says Frank J. Fahrenkopf Jr., president of AGA. On top of the added competition from neighboring states, Fahrenkopf said the recession and global credit crisis struck just as the city was preparing a wave of new development projects that never got off the ground. One of the projects, the $2.8 billion Revel casino, is now set to open next summer, aided by a package of laws Governor Chris Christie signed in February, aimed at revitalizing Atlantic City. Among the provisions were $260 million in tax credits.

The tax figures don't just reflect differences in rates or types of gambling. They reflect an increasing supply of product. Casino games are essentially a coast-to-coast enterprise now. High rollers once had to venture to the desert in Nevada or the beach in Atlantic City to find legalized roulette, slot machines or blackjack. Now the establishments in those places are competing with some 670 other commercial and tribal casinos that stretch from the Mississippi River to the mountains of Colorado and even downtown Philadelphia. All but two states — Hawaii and Utah — rely on some form of gambling, including lotteries, to help pay for schools, health care and other basic services.

Of all the varieties of gambling, lotteries actually provide states with the most revenue. States made nearly $18 billion in profits on the $59 billion in lottery tickets they sold in 2010, according to the North American Association of State and Provincial Lotteries. The AGA study did not include lotteries; it focused solely on casinos.

The AGA report also doesn't include information on some 440 casinos owned and operated by Native Americans in 28 states. Before opening casino-style gambling establishments, tribes and states negotiate "compacts" that often, though not always, include sharing the receipts. But these tax agreements bring in far less revenue than states collect from commercial casinos. State and local governments received only $1.7 billion from fees and revenue-sharing agreements with tribes in 2009, according to Alan Meister, an economist who is an authority on Indian gambling and author of the 2011 "Indian Gaming Industry Report."

Expansion year

Casino gambling used to be considered a virtually recession-proof industry, but that hasn't proved true in recent years. Casino revenue nationwide declined 1.6 percent from 2008 to 2009 before bouncing back in 2010.

The 2010 comeback was fueled in large part by an expansion in the number of casinos in business. States that opened new facilities saw some of the largest increases in revenue, tax contribution and jobs. The opening of the Sugarhouse Casino in downtown Philadelphia, and the addition of more table games, helped boost Pennsylvania's gaming tax revenues by nearly 19 percent. In Florida, the opening of a new casino in January of 2010 and the first full operating year of another casino gave the state a 30 percent increase in tax contributions, totaling $140 million, which was used for education.

Last year also marked the first full year of operations at the country's only state-owned resort casino, in Kansas, providing that state nearly $9.5 million in tax revenue that was used to reduce the state's debt and to provide for infrastructure, according to AGA.

But not all state treasuries enjoyed the spoils of more gambling in 2010. While 13 states saw an uptick in gaming taxes, eight saw declines. After New Jersey, AGA said, states that experienced the largest declines in gambling tax revenue were West Virginia (7.3 percent despite adding table games), Illinois (6 percent) and Louisiana (4.4 percent).

In total revenue, not just tax revenue, casino and card room gaming provided about 43 percent of the estimated $88 billion in overall U.S. gambling proceeds in 2009, while tribal gaming followed with 30 percent and lotteries 24 percent, according to " Casino City's North American Gaming Almanac ."


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