Gambling Revenue Lures Lawmakers To Hike Tax On Boats

SPRINGFIELD:- Struggling to fill a massive state budget deficit by tonight, the Illinois House on Friday voted to deal the casino industry a sharp tax increase for the second year in a row.

After a spring session spent wrangling over possible gambling expansion, the Illinois House voted 62-53 for a plan that would increase the tax for all nine riverboats in the state. The plan still needs the approval of the Senate before midnight today, the scheduled day of adjournment. Under the plan:

Any casino earning more than $250 million in adjusted gross receipts (income after payouts to gamblers, but before expenses) would be taxed 70 percent, up from 50 percent. Three northern Illinois casinos - in Aurora, Joliet and Elgin - fall under that rate.

Any casino that rakes in more than $100 million would be taxed at 50 percent, instead of the current range of 37.5 percent to 45 percent. Five boats fall in this category.

One other casino, in Rock Island, makes about $40 million. It would be taxed at 32.5 percent, instead of 22.5 percent. The proposal also calls for the two Metro East-area boats to increase their per-patron tax, which the boats currently absorb, from $3 to $4. Combined, the Metro East-area boats would pay about $27 million more in taxes under the plan.

Immediately, industry analysts and boat managers forecast that the increase would require a decrease in staff, hours of operation, and the amount of table games, such as poker and blackjack. The proposal is short-term, however - the tax structure would revert to the current rates by July 1, 2005, or when the state's dormant 10th license is operational.

Last year, the Legislature increased the top tax to 50 percent from 35 percent to try to fix the state's budget problems. This year, the state is in even worse fiscal shape and faces a $5 billion deficit. The 70 percent rate makes Illinois' tax double any other state's casino tax.

This spring, legislators were considering a package of bills that would have allowed slots at racetracks and given more slots to the existing casinos. They were also considering legalizing additional boats in the Chicago area and video poker in liquor-serving establishments.

Then, Gov. Rod Blagojevich announced this month that he would veto any legislation expanding gambling, and that he would continue to push his proposal to increase the tax rates, believing the boats can pump more tax money into the state's coffers.

His legislative ally, Rep. Jay Hoffman, D-Collinsville, sponsored the bill, and said the casinos' bottom lines show that they can easily shoulder an increase. Blagojevich thinks the new taxes will produce $200 million for the state treasury.

But several legislators, especially those with a boat in their district, spoke out against the increase, saying that a 70 percent tax was excessive, and will drive business into Illinois' neighboring states. Most of the riverboats face fierce competition from Missouri, Iowa or Indiana.