• Why two Md. casinos want to add more table games

    An article on the proposal to replace slots with table games at Maryland Live! Casino and the Horseshoe Casino Baltimore.

    http://www.bizjournals.com/washingto...ry+Health+Care)

    Comments 14 Comments
    1. Aslan's Avatar
      Aslan -
      I am not interested in the politics of it, but what struck me was the obscene tax rate on slot machines. Someone may want to inform me why a 61% to 67% tax rate is appropriate for any particular revenue stream for any business operating in the United States. Could this be the reason many casinos seemed unable to weather the economic vicissitudes of recent years while less profitable businesses fared better? By profitable I mean net income before taxes. It seems an illusion that the casinos are robbing the public blind, when they are not the main beneficiaries of their operations, at least, not in the area of slot machine gaming.
    1. Blitzkrieg's Avatar
      Blitzkrieg -
      The tax rate is high on machines probably because they seem to take more off of the public. Plus they don't have to pay a machine, besides for an operator to do maintenance. I think it's one of the reasons but not the main reason as to why the industry seems to be tightening up over the last few years. It doesn't seem like an illusion to me that the casinos are robbing the public blind. The public will gladly had them their cash. It seems like the main beneficiaries are the ownership, investors, and state.
    1. Aslan's Avatar
      Aslan -
      Quote Originally Posted by Blitzkrieg View Post
      The tax rate is high on machines probably because they seem to take more off of the public. Plus they don't have to pay a machine, besides for an operator to do maintenance. I think it's one of the reasons but not the main reason as to why the industry seems to be tightening up over the last few years. It doesn't seem like an illusion to me that the casinos are robbing the public blind. The public will gladly had them their cash. It seems like the main beneficiaries are the ownership, investors, and state.
      So, are you saying that if a business is especially profitable, the government deserves a bigger portion of it? That does not seem like a sound economic principle to me.

      What I was driving at, Blitz, is that the real robber may be the state government, not the casino. With a 67% state tax, the casino stands side by side with the customer as a victim. At least, this could be argued.
    1. Three's Avatar
      Three -
      I am not sure if it changed but originally the state owns the slot machines and the casinos only operate them for the state of Md. Each casino gets a different deal. One was renting the machines and had a real fight on their hands to try to return machines that only took up floor space. This is Md. The state lives off the Federal Government's teat. They have driven every private business than can move out of the state out with extreme taxation. Neighboring states are more tan happy to increase their tax base. There is even a sign as you drive into Virginia that says something like Virginia welcomes Md businesses to a better home. The sign went up when Md raised it's business tax from high to ridiculous under the administration that just left.

      The state of Md was largely unaffected by the any economic downturns due to most of the income is from Federal Government employees or government contractors. Only when there are threats of government cutbacks or a shutdown does the state worry about their unfriendly to business atmosphere. That lasts maybe a month but usually just a week or so and then everyone gets paid for the time they didn't work on the slowdown. The point is you can't expect taxation the way the rest of the country gets it in Md because the revenue from all the federal government workers and contractors that ends up in the state keeps the state fat and happy and so far fairly insulated from the monetary issues that may plague other states in an economic downturn.

      The result they don't court business interests to be in the state and rape the ones that are here with ridiculous taxes. The casino industry is no exception. Almost every bill you pay to a local company is now mailed out of state. Their headquarters are in other states. I am guessing this fairly recent change is to avoid business taxes in this state. The casinos are owned by out of state companies so they had to come up with another way to rape them. Renting them the slot machines and requiring them to rent a specific number even if they don't need them and then having a really high tax rate on slot revenue. My host told me not to play on their companies Md slot machines because they have to be so tight due to paying over 60% of the gross in taxes on the machines.
    1. Blitzkrieg's Avatar
      Blitzkrieg -
      Quote Originally Posted by Aslan View Post
      So, are you saying that if a business is especially profitable, the government deserves a bigger portion of it? That does not seem like a sound economic principle to me.

      What I was driving at, Blitz, is that the real robber may be the state government, not the casino. With a 67% state tax, the casino stands side by side with the customer as a victim. At least, this could be argued.
      The state government doesn't deserve a bigger portion of it. I would look to give them the least as possible but that's the nature of how they crafted that deal or what state laws say they will have to give from the using of gaming machines if that's how it works in Maryland. The casino never stands side-by-side with the player in my book and they never will. They are an adversary to be dealt with, not an ally.
    1. Norm's Avatar
      Norm -
      In the case of casinos, the taxes are a part of convincing voters and legislators to allow their existence. Casinos are not popular with much of the electorate. Some consider them a vice (so what). Some consider them a source of crime. Some consider them a cost to society. But, if you say they will be taxed heavily and the taxes used to aide schools (NY) or lower property taxes (NJ), then you’ll get more votes for them. Whether or not they actually come through on such promises is another matter.
    1. Three's Avatar
      Three -
      Quote Originally Posted by Norm View Post
      But, if you say they will be taxed heavily and the taxes used to aide schools (NY) or lower property taxes (NJ), then you’ll get more votes for them. Whether or not they actually come through on such promises is another matter.
      They use the money for what they say and spend the money they would have spent on that coming from other sources elsewhere. An old con to do what they said without doing what you think they said.
    1. Aslan's Avatar
      Aslan -
      Quote Originally Posted by Blitzkrieg View Post
      The state government doesn't deserve a bigger portion of it. I would look to give them the least as possible but that's the nature of how they crafted that deal or what state laws say they will have to give from the using of gaming machines if that's how it works in Maryland. The casino never stands side-by-side with the player in my book and they never will. They are an adversary to be dealt with, not an ally.
      If what Tthree says holds true, in Maryland the real owner of the casino is the state government and the corporation we call the casino is really only the operator of the state's machines, giving the state their ownership percentage, and taking the lessor amount for themselves and their stockholders. I don't know if the same relationship holds true for table games.
    1. bigplayer's Avatar
      bigplayer -
      Quote Originally Posted by Aslan View Post
      Someone may want to inform me why a 61% to 67% tax rate is appropriate for any particular revenue stream for any business operating in the United States.
      I'd flip the question around. Why not? Owning a casino is a license to steal. Casinos knew the tax rate when they applied for a license. A better question is why low tax states are willing to allow themselves to be used by casino companies to finance construction of casino's in other jurisdictions. If Nevada had a 65% tax rate on casino revenues do you think for an instant that any of these companies would have had the money to become the mega-casino companies that they are today? I'm not saying that 67% is the optimum tax rate, but certainly the optimum rate is somewhere between the 6.75% max rate in Nevada and the 70% rate in Illinois. Nevada has had all sorts of funding and budget issues, I'd think if they tripled the current casino rate to 20.25% casinos would still be relatively undertaxed compared to the national average.
    1. Norm's Avatar
      Norm -
      It is what it is. Casinos, in the past, have a business model that allows them to make a remarkable profit, sometimes from addicts, and yet a remarkable number go bankrupt. Nevada is one of the handful of states that has no income tax. But, they have the second largest income by percentage from sales tax. Which makes sense for a vacation destination.

      As for the claimed 67% tax rate in Maryland; I believe the reader misunderstood. Maryland video lottery terminals require that 67% of revenue go to the state. That seems to me to be incredibly generous to lottery terminal proprietors. This is NOT a tax. It means that a store with a lottery terminal gets to keep 33% of the price of a lottery ticket. And, shares no risk from winners. That’s damn good. Hey, If I was six-years old, screw the lemonade stand -- give me a lottery terminal.
    1. Aslan's Avatar
      Aslan -
      Quote Originally Posted by bigplayer View Post
      I'd flip the question around. Why not? Owning a casino is a license to steal. Casinos knew the tax rate when they applied for a license. A better question is why low tax states are willing to allow themselves to be used by casino companies to finance construction of casino's in other jurisdictions. If Nevada had a 65% tax rate on casino revenues do you think for an instant that any of these companies would have had the money to become the mega-casino companies that they are today? I'm not saying that 67% is the optimum tax rate, but certainly the optimum rate is somewhere between the 6.75% max rate in Nevada and the 70% rate in Illinois. Nevada has had all sorts of funding and budget issues, I'd think if they tripled the current casino rate to 20.25% casinos would still be relatively undertaxed compared to the national average.
      The national average for corporations or for casinos? You see, I don't see things your way. States should not license casinos in the first place; anyone should be able to go into the casino business, unless you're saying they are evil, and then the state should not be allowing them at all, much less sharing in their profits. If anyone could go into the casino business we would have true competition, and then you would not see the "license to steal" as you say. It's the states that give casinos their "license to steal" because the states benefit from the theft. Competition would bring about casinos that would boast about having the smallest margin of profit on table games and slots, and having the best rules in the state or country. As it is, only a very few can get into the business, and they tend to act like Coke and Pepsi, appearing to be competitors, but each hiking its prices within two weeks of the other, a kind of unspoken collusion. The granting of shared monopolies is what is killing casinos. Only a handful can do business in any given area of the country, and they will push the limit allowed by the state without fear of "real" competition to undercut them. If you want good rules and fair games, get the states out of the casino business and tax them just like any other business. For all intents and purposes, the states run the casinos-- they set the rules and they take most of the profits in most states (Indian casinos excepted).
    1. Aslan's Avatar
      Aslan -
      Quote Originally Posted by Norm View Post
      It is what it is. Casinos, in the past, have a business model that allows them to make a remarkable profit, sometimes from addicts, and yet a remarkable number go bankrupt. Nevada is one of the handful of states that has no income tax. But, they have the second largest income by percentage from sales tax. Which makes sense for a vacation destination.

      As for the claimed 67% tax rate in Maryland; I believe the reader misunderstood. Maryland video lottery terminals require that 67% of revenue go to the state. That seems to me to be incredibly generous to lottery terminal proprietors. This is NOT a tax. It means that a store with a lottery terminal gets to keep 33% of the price of a lottery ticket. And, shares no risk from winners. That’s damn good. Hey, If I was six-years old, screw the lemonade stand -- give me a lottery terminal.
      In effect, the state is the casino and it pays the casino operator a share in the profits to operate and maintain its casino. It is not a free enterprise model.
    1. MJGolf's Avatar
      MJGolf -
      C'mon ASLAN........you KNOW anything involved with a "state government" is NOT a free enterprise model. You have been around WAY longer than that! I actually worked for a state contractor for a while that operated for one of the arms of state government. By statute we were given the power to act on behalf of the government. That is NO free enterprise...........both ways. LOL
    1. Aslan's Avatar
      Aslan -
      Quote Originally Posted by MJGolf View Post
      C'mon ASLAN........you KNOW anything involved with a "state government" is NOT a free enterprise model. You have been around WAY longer than that! I actually worked for a state contractor for a while that operated for one of the arms of state government. By statute we were given the power to act on behalf of the government. That is NO free enterprise...........both ways. LOL
      Did I say differently???

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