Casino tax hike: Possible by fiscal 2010-’11
Author: - May 1, 2009 - Updated: May 1, 2009
Is it possible to tell how much profit casinos will earn in small bets in future years despite the passage of Amendment 50 in 2008? I think so.
The Legislative Council prepared a booklet for Colorado voters to consider when they debated whether to support Amendment 50, which passed, hiking maximum bets, allowing more games and extending casino hours.
More than $100 million in tax money went to the state from casinos in the fiscal year ending June 30, 2008. Based on a maximum 20 percent tax placed by the Gaming Commission on casino profits, casino profits must have amounted to more than $400 million for the corporations and their stockowners that fiscal year.
Consider a five-year period into the future: The fiscal study assumed a tax payment if Amendment 50 passed (mostly for community college use) of $300 million. Based on play continued under the pre-Amendment maximums, it is logical to expect the same five-year period would have provided a $500 million state tax payment from casinos.
But the constitutional amendment wasn’t intended to allow the pre-Amendment 50 casino profit to continue to grow at a normal pace. The first-year increase under Amendment 50 was to be limited to no more than 6 percent of the fiscal tax funds growth for fiscal 2009-2010.
Meanwhile, the Associated Press has produced a study that shows penny bets produce large funds for casinos, providing 25 percent of Nevada’s gambling revenue and more than 50 percent of Missouri’s. If Missouri and Nevada can figure out how much money comes from penny bets, why can’t Colorado?
Suppose the Gaming Commission votes to raise the casino tax by 10 percent, to a total 30 percent. The Constitution allows a casino tax up to a maximum of 40 percent. A tax hike is approved first by a Gaming Commission vote.
Before Amendment 50, that commission vote was all that was necessary. But now a statewide ballot is required to approve a tax increase. How does it get on the ballot in November 2009 for the following fiscal year?
Does it go directly to the Department of State, or does it have to be approved by a legislative vote?
I cannot ever recall as a legislator having to vote on an executive branch rule to be placed on the ballot. The answer to that question could have been provided in HB 1272, which actually highlighted the issue by referring to a statewide election under Section 20 (4) of Article X of the Constitution, “without regard to any limitation contained in section 20 of Article X … or any other law.”
But there was no answer provided to the issue. Perhaps there is still time in another bill or amendment to state, “The issue goes directly from the Gaming Commission to the Department of State, and not through the Legislature.”
Before the Commission could vote for a tax increase, it would have to
give the casino companies an opportunity to appear in hearing, and the Commission has to leave a licensed operator of a casino a reasonable (or “fair and just”) profit after statutory scheduled costs are paid under CRS 12-47.1-Part 6.
That decision also requires consideration of profit obtained by other gambling programs in or out of Colorado.
Neither Amendment 50 nor HB 1272 affects the Gaming Commission’s ability to “reduce” a tax on casinos by rule, which does NOT have to go to a statewide election.
The closest action by statewide voters on a legislative action on a rule occurred in 1932, on a question of whether to increase the tax on oleomargarine. But that begs the issue of whether the Legislature needs to act on a Gaming Commission’s constitutional authority to set out a casino tax percent.
Jerry Kopel served 22 years in the Colorado House.