A recent study showed that Atlantic City casinos pay taxes at a rate that pails in comparison to the tax rates charged by other, neighboring states. While this may not seem like such a big deal, people close to the situation say that the sub-par tax rate in Atlantic City is something that is contributing to the city’s financial problems.
In Atlantic City, casinos pay a total of 9.25% of gross gaming revenue back to the city/state as taxes. This rate amounted to a total of $237 million in taxes being paid by the end of the 2016—a number that was significantly smaller than other states.
According to the Press of Atlantic City, Pennsylvania’s 12 casinos paid more than $1.3 billion in taxes last year, while New York’s casinos paid in just shy of $900 million. Even Maryland, which only has 5 casinos, paid almost double what Atlantic City casinos paid in, with more than $450 million. This is not only surprising because of the large number of casinos in Atlantic City, it is surprising because the AC casino industry has been around a whole lot longer than the industries in the 3 other states mentioned.
Jeff Gural, who owns the Meadowlands in New Jersey, spoke on the tax situation by saying, “You guys have been ripped off by the casino industry for 30 years. I wrote the casino laws in New York. The tax rate here is a fiasco. Basically what has happened in Atlantic City is that operators have taken profits from here and built competition for Atlantic City.”
In Pennsylvania, New York, and most other states on the East Coast and around the country, the tax rates are much higher than they are in New Jersey. For Atlantic City, low tax rates were what initially brought operators to the seaside location, but as competition continues to increase these same low tax rates are hurting the industry as a whole.
In 2015, a New Jersey assemblyman by the name of Chris Brown proposed a new tax plan which would see casinos pay taxes on more than just gaming revenue. Under Brown’s proposed (and ultimately defeated) plan, taxes would also be levied on food, beverage, and entertainment. For many people, this plan made sense because there were and still are a large number of people who go to Atlantic City for things other than gambling alone. According to Brown, the plan he proposed back in 2015 would have created just shy of $100 million in additional tax revenues from AC casinos.
If this is not the first time you have heard arguments regarding the casino tax situation in New Jersey, that is because this is not the first time changes to the tax code have been proposed. Back in 2003, a flat 10% tax on all casino revenue was proposed, however that measure also ended fruitlessly. While it seems to be the wisest financial move to make, not everyone agrees that now is the time to raise tax rates on the casino industry.
Assemblyman Vince Mazzeo commented on what raising tax rates right now might do to the industry as a whole, and why it might not be the wisest decision to make. He said, “At a time when Atlantic City is on the rebound, I don’t believe raising taxes on the city’s biggest industry and employer will benefit our region. Now with the PILOT program in place, we’ve stopped the tax-appeal lottery and stabilized the ratable base so we can continue to allow Atlantic City to prosper.”
I am sure there are changes coming to the tax rates facing Atlantic City casinos, however I would have to agree that if they are imposed in the immediate future, the rebound we are currently witnessing might be jeopardized.