More casinos won’t help Illinois finances

In Illinois, Lincoln’s essential premise of “government of the people, by the people, and for the people” has been corrupted into “government of the casinos, by the casinos, and for the casinos” – as exemplified by the new casino legislation in Senate Bill 7.

In 2015, U.S. congressional hearings highlighted that much of the Illinois financial problem was precipitated by $35 billion to $100 billion in giveaways since 1990 to gambling interests, diverting funds particularly away from essential education funding. For example, the original 10 Illinois casino licenses worth $5 billion were given away for only $25,000 each to political insiders.

By comparison, the new SB 7 legislation gives away another 10 casino licenses, worth billions of dollars on Wall Street, for only $100,000 each. This is another giveaway of $3 billion to $6 billion to political insiders.

The current low tax rates on Illinois casinos would also be specifically lowered further by SB 7. In addition, SB 7 allows casinos to significantly reduce their Adjusted Gross Revenues (AGRs) on which their taxes are based by up to 30 percent by granting vouchers and “comps” to draw in gamblers.

Even the Illinois governmental Commission on Government Forecasting and Accountability (COGFA) confirms in its report of Jan. 11, 2017, that tax revenues under the new gambling legislation “would be lower than under current law.” The COGFA report highlights in bold print that: “The reduction of the tax rates would negatively affect State revenues.”

The current graduated tax on Illinois casinos is 15 percent, increasing to 50 percent if a casino exceeds $200 million in Adjusted Gross Receipts. SB 7 reduces the graduated tax to 10 percent and uses sleight-of-hand provisions to create separate taxation categories for table games and Electronic Gambling Devices (EGDs/slot machines). Table games would be taxed at a maximum of 16 percent if the AGR exceeds $70 million, while EGDs would be taxed up to 50 percent if the AGR exceeds $800 million.

These tax provisions may look reasonable, but the net effect is that no Illinois casino would ever meet the maximum tax rate for EGDs/slot machines, and only the Rivers Casino could potentially reach the maximum tax on table games.

Concerned about the initial 10 Illinois casinos and with the crime increases associated with EGDs/slot machines, Illinois’ U.S. Senator Paul Simon and U.S. Rep. Henry Hyde established the congressional bipartisan U.S. National Gambling Impact Study Commission. The U.S. Gambling Commission concluded in 1999 that there should be a moratorium on the expansion of any type of gambling anywhere in the United States. The commission also highlighted that EGDs/slot machines constituted the “crack cocaine” of hooking new addicted gamblers (similar to drug addicts) and that around gambling facilities the numbers of new addicted gamblers increased by 100 percent.

Since the U.S. Gambling Commission, these conclusions have been periodically reconfirmed in the multivolume United States International Gaming Report® produced at the University of Illinois and in concert with other research universities.

Importantly, the definitive decade-long research study by Professors Earl Grinols and David Mustard, published by Harvard and MIT, analyzed the “before-and-after” crime statistics for new gambling jurisdictions. Once EGDs/slot machines are introduced to an area, crime increases an average 10 percent per year,n compounding every year. Bankruptcies also increase 18 percent to 42 percent as people lose their monies.

Increased gambling addiction causes spousal abuse, child abuse, suicides and other social maladies. It is well established academically that the socio-economic costs to the taxpayers are $3 or more for every $1 in benefits.

When the casinos first came to Illinois in 1990, the academic community repeatedly predicted in legislative hearings that gambling interests would create significant pressures on the Illinois budget. But the impact of $35 billion to $100 billion in giveaways to gambling’s political insiders has been alarming.

Teachers, students, public employees and the public should be outraged at the diversion of taxpayer funds away from the Illinois treasury to benefit gambling interests.

For over 30 years, Prof. John Kindt has served as a faculty-elected University of Illinois senator dealing with state budget and education issues. He is also a senior editor of the multivolume U.S. International Gaming Report®.

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