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- Legalization, taxation and regulation of stand-alone electronic gaming devices (EGDs) present a new revenue source for the state as well as for local units of government, many of which are in financial straits similar to the state.
- Adjusted gross revenues from EGO play at riverboat casinos in Indiana continue to show comfortable growth, despite ongoing competition from the existing, untaxed, stand-alone EGDs that have operated for many years in Indiana. (See Charts 1 and 2.)
- The National Gambling Impact Study Commission (NGISC) reported in 1999 that legalized, stand-alone EGDs were in operation in six states.
- The revenue estimation model presented here uses conservative assumptions and examines two alternative rates of taxation on EGD adjusted gross revenues (25 percent and 30 percent) and three levels for the number of machines installed per location (3,5,7).
- At the lowest tax rate we examined, and utilizing three machines per location, the lowest proposed parameter, a gaming tax on EGDs can raise about $144 million per year. At the two-third/one-third split between state and local government, this means that Indiana would receive about $96 million in additional revenues, while local governments would receive about $48 million. (See Charts 3,4,5.)
- If the EGD gaming tax were to be levied at the higher rate of 30 percent and the number of machines per establishment raised to seven, the amount of revenue generated would exceed $400 million. In this scenario, state government would receive more than $268 million in additional revenue, and local units of government would share more than $134 million.
The legislation proposed would:
- Permit holders of on-premises consumption of alcoholic beverage
licenses to operate EGDs on the licensed premises.
- Establish an appropriate rate of taxation that ensures a positive
revenue stream to the state.
- Establish a maximum number of EGDs that may be operated on the
premises of a license holder.
- Prohibit EGDs play by minors.
- Require that EGDs be out of sight of minors.
- Thousands of Hoosier businesses, most of them small and locally owned
and operated, would benefit from the additional revenues that would be
generated by stand-alone EGD gaming.
Summary
There are alternatives to the traditional responses
to a budgetary challenge, and the legislature would be well-advised to
consider a wide range of options in lieu of budget cuts or increases to
general-purpose taxes in addition to those enacted in the special
session. One such alternative is proposed here: the legalization,
taxation and regulation of electronic gaming devices (EGDs) in
stand-alone configurations.
Action to legalize stand-alone EGDs would have important benefits to
the citizens of Indiana. It would recognize the reality that such
activity already takes place in venues across the state, bring it under
regulatory control to ensure that the machines are operated
appropriately and fairly, and assess taxes that would help to meet the
current fiscal challenge. An EGD gaming tax can be an important source
of revenue for the state, and the legislature should give it serious
consideration.
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