Maryland slots: How the House wins

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The Taxpayers Protection Alliance, a Virginia-based nonprofit that advocates nationally for lower taxes and smaller government, has been running radio ads in the Baltimore area with a simple message: Don't give gaming companies a big tax break.

That might seem like an odd message for an anti-tax advocacy group, but the explanation is in how the debate is framed. The spot argues that reducing the tax on slot machine proceeds — as lawmakers are contemplating in order to create a sixth casino site inPrince George's County— would amount to a huge giveaway to large gaming companies only a matter of months after the General Assembly raised Maryland's income tax rate.

That, the organization argues, would be a misplaced priority — unfair to state residents and bad for the economy (and Maryland's competitiveness with other states) -- and would not spur growth but merely cause gambling proceeds to be shared by more operators.

It's a smart ad because it's a compelling argument and a prime reason why leaders in the House of Delegates should not cave in to demands by the Senate to lower the slots tax rate in a special session later this month in order to facilitate an upscale casino at National Harbor. That elected officials are even contemplating such a move in such a short time frame and with the huge stakes involved to both the state and local communities (particularly given the proximity of the recently-opened Maryland Live Casino at Arundel Mills and the planned Caesars Entertainment Corp. casino in downtown Baltimore) is worrisome, to say the least.

No doubt House SpeakerMichael E. Buschis feeling the heat from Senate President Thomas V. Mike Miller, the State House's leading advocate for expansion intoPrince George's Countywho appears to have surprisingly strong support from Gov.Martin O'Malley. Mr. Busch and his top lieutenants met behind closed doors this week to make a "fair assessment" of where members stand on the issue.

Here's where they should stand — firm. The House ought not be bullied by the Senate, where deep-pocketed gambling interests rarely meet with much resistance from Mr. Miller whether it's companies like MGM Resorts International, the company that wants to develop a full-fledged casino at National Harbor, or horse racing interests before them.

The House is willing to go along with most of what Mr. Miller and Governor O'Malley want, including legalizing table games and allowing the sixth casino, despite the protests of local developer David Cordish who just invested $500 million in his Anne Arundel County casino. But reducing the tax substantially? That's what gives House leadership pause, and for good reason.

Raising Maryland's income tax was supposedly done with great reluctance this year. It affects far more than just the state's wealthiest residents. As of July 1, the state income tax rate rose on about 14 percent of Maryland residents (including individuals earning $100,000 or more and families earning $150,000), to the tune of $250 million annually.

That's a lot to extract from one's citizenry but it seemed justified given that the alternative of more budget cuts would have caused harm to public schools. Shouldn't those individuals be first in line for a tax cut and well ahead of MGM?

Advocates for a lower slots tax rate say Maryland's 67 percent take stifles investment by casino operators. They say the state could see increased economic development at National Harbor and elsewhere by reducing the tax. But if Maryland is ever going to take that path, it needs to make sure taxpayers and not casino operators are the big winners. None of the economic impact estimates prepared by the backers of gambling expansion have come close to promising that.

This is not a bet to be made hastily. At best, MGM likely wouldn't be able to open a casino at National Harbor until 2016. Caesars doesn't expect to open in Baltimore until 2014 at the earliest. There is plenty of time to jigger with tax rates in future years as more is known about the consequences of such an act. The argument that it must be done in the next few weeks in order to get voter approval this year just isn't sufficiently compelling.

Copyright © 2014, Los Angeles Times
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