The Herald Bulletin

Morning Update

Opinion

January 8, 2013

Editorial: State counted too much on gambling revenue

The state predictions are not encouraging. If correct, there will be a big drop in gambling tax revenue over the next few years. A 9 percent drop is predicted for 2013.

The cause is increased competition in surrounding states. Ohio opened land-based casinos in Cleveland, Toledo and Columbus this year, and the final one will open in Cincinnati. These are targeted to major metropolitan areas and are far enough apart so as not to compete with one another. But Indiana’s southeastern casinos will feel the sting of its Ohio competition. And, if Dayton gets one, the central Indiana racinos could be affected.

Indiana’s casinos in the northwest will soon be facing competition from Michigan and new casinos slated to open in Illinois. Indiana is being squeezed.

Hoosier Park is currently in talks with the state horse racing and gaming commissions to purchase Indiana Downs. Both establishments should continue to draw gamblers even from western Ohio where Cincinnati and Columbus are farther away. But a day of reckoning is coming, and the state needs to prepare.

Casinos are taxed, literally, like nobody’s business. Under Gov. Daniels’ conservative leadership, businesses are deferred to and routinely given tax breaks in order to create jobs. Not casinos. The state depends heavily on taxing their revenue for basic funding. In fact, casino taxes are the third largest revenue source for the state.

As state Rep. Ed Clere, R-New Albany, said, “It’s sobering. As a state, we’ve built a revenue structure with components that are changing whether we like it or not.”

Not only that, but the state has consistently overestimated the dollars involved in gambling. When the racinos began, the state took an upfront licensing fee of $250 million, which eventually led both Hoosier Park and Indiana Downs into bankruptcy. Now, Indiana’s 11 riverboat casinos are taxed up to 40 percent on gross gambling revenues, and the two racinos pay up to 35 percent of gross gaming revenues.

The competition can be blamed for falling revenues and so can the leveling off of gambling dollars even before the competition got started. But the fact is, the state expected too much and built its budgets on an ephemeral enterprise. That was a mistake, and now the state will have to come up with another source of revenue when Ohio begins siphoning off Indiana gamblers.

Instead of going for the quick buck, Indiana legislators and the Daniels administration needed a more solid foundation on which to base revenue. Now the legislators and the Pence administration will have to find it.

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