Kasich’s Casino Strategy – Worst Extortion Ever?

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Something’s been bothering me about the Governor’s foot-dragging strategy to get more money out of the casinos for almost a week now. In case you’ve missed it, the state gets next to nothing in taxes from the casinos – the constitutional amendment sends all the revenue to schools and local governments (the same schools and local governments, by the way, that Kasich screwed over in his budget, so it’s quite a slap in the face that his indecision is potentially costing them even more revenue, but that’s another story).

The issue at play is whether Kasich can use whatever leverage he can muster to get the casinos to voluntarily cough up more money to the state. He insisted that the House include a provision in the budget to specify that the state’s Commercial Activity Tax applies to casinos gross wagering, not net. The difference is “tens of millions of dollars” annually from each casino, so somewhere south of $100 million per year for the state if successful. Beyond the CAT tax, the Casinos could be asked to voluntarily offer to pay more for certain fees, but again, we’re talking in the tens of millions of dollars, max.

One item the Governor’s advisors have indicated they intend to use as leverage are Video Lottery Terminals. You may recall the state proposed introducing what amounts to slot machines at racetracks, overseen by the Lottery Commission, back in 2009. A referendum campaign — led coincidentally by the husband of Kasich’s chief of staff, Beth Hansen — delayed the plan, but the group, LetOhioVote, subsequently dropped its effort, meaning VLTs can now move forward.

How can VLTs be used as leverage? If racetracks in Ohio have slots, it could cost Ohio casinos 25% of their profits. So Kasich’s advisors have suggested we threaten to move forward with the VLT plan to get the casinos to cough up more money. Here’s the problem — what happens if the casinos bite on this? The state puts VLTs back on the shelf. Here’s the trouble with that: VLTs are worth $650 million per year* in taxes for the state. In other words, Kasich is willing to give up hundreds of millions in order to get tens of millions? It’s mind boggling. And it has to be the worst effort at extortion ever on display in Ohio.

(*note: $765 million was estimated for a 14-month period in 2010 and 2011, or just over $54 million per month)

It’s like going all in with an open-ended straight draw when there’s a flush on the board. But I doubt Kasich is any good at poker, either.

Here’s what we propose: the Senate should include two amendments in the budget:

  • one, requiring the Governor move forward with VLTs by a date-certain deadline, say September of this year. Budget the revenue for schools and call it a victory.
  • and two, drop the amendment about whether the CAT tax applies on casino wagering. it’s not that much money, and what matters more is getting them built, the investment made and the jobs created. the Tax Department thinks the CAT applies regardless, so let the courts settle it.

(you’re welcome. Governor. And we won’t even charge you $400/hour for the advice)

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  1. I thought he was supposed to be a good buddy to big business. Now he wants to drain this one. The people of Ohio have clearly said how we want the revenue spent and not to go into his coffers. The sooner we get rid of this business-whore the bett off we will be (IMHO)!


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