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This page was last updated:
09/21/06 |
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A New
Revenue Source:
Legalized Electronic
Gaming
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Legalization, taxation
and regulation of stand-alone electronic gaming devices (EGDs) present a
new revenue source for the state as well as for local units of
government, many of which are in financial straits similar to the state.
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Adjusted gross revenues
from EGO play at riverboat casinos in Indiana continue to show
comfortable growth, despite ongoing competition from the existing,
untaxed, stand-alone EGDs that have operated for many years in Indiana.
(See Charts 1 and 2.)
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Chart 1
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Chart 2
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The National Gambling
Impact Study Commission (NGISC) reported in 1999 that legalized,
stand-alone EGDs were in operation in six states.
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The revenue estimation
model presented here uses conservative assumptions and examines two
alternative rates of taxation on EGD adjusted gross revenues (25 percent
and 30 percent) and three levels for the number of machines installed
per location (3,5,7).
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At the lowest tax rate we
examined, and utilizing three machines per location, the lowest proposed
parameter, a gaming tax on EGDs can raise about $144 million per year.
At the two-third/one-third split between state and local government,
this means that Indiana would receive about $96 million in additional
revenues, while local governments would receive about $48 million. (See
Charts 3,4,5.) |
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If the EGD gaming tax
were to be levied at the higher rate of 30 percent and the number of
machines per establishment raised to seven, the amount of revenue
generated would exceed $400 million. In this scenario, state government
would receive more than $268 million in additional revenue, and local
units of government would share more than $134 million.
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The legislation
proposed would:
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Permit
holders of on-premises consumption of alcoholic beverage licenses to
operate EGDs on the licensed premises.
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Establish
an appropriate rate of taxation that ensures a positive revenue stream
to the state.
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Establish
a maximum number of EGDs that may be operated on the premises of a
license holder.
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Prohibit
EGDs play by minors.
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Require
that EGDs be out of sight of minors.
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Thousands of Hoosier businesses, most
of them small and locally owned and operated, would benefit from the
additional revenues that would be generated by stand-alone EGD gaming. |
Summary
There are alternatives to the traditional
responses to a budgetary challenge, and the legislature would be
well-advised to consider a wide range of options in lieu of budget cuts or
increases to general-purpose taxes in addition to those enacted in the
special session. One such alternative is proposed here: the legalization,
taxation and regulation of electronic gaming devices (EGDs) in stand-alone
configurations.
Action to legalize
stand-alone EGDs would have important benefits to the citizens of Indiana.
It would recognize the reality that such activity already takes place in
venues across the state, bring it under regulatory control to ensure that
the machines are operated appropriately and fairly, and assess taxes that
would help to meet the current fiscal challenge. An EGD gaming tax can be
an important source of revenue for the state, and the legislature should
give it serious consideration.
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