Casino Stocks Slump on N.J. Gambling Tax Plan

A proposal to increase Atlantic City gambling taxes clobbered stocks of casino operators Tuesday.

Shares of Park Place Entertainment Corp., which owns Caesars and Bally’s casinos in Atlantic City, fell 42 cents, or 5.5%, to $7.18 on the NYSE, while Harrah’s Entertainment Inc. lost $1.40, or 3.8%, to $35.20 and Mandalay Resort Group was off 96 cents, or 3.7%, to $24.75, all in NYSE trading.

Several states, including New Jersey and California, are considering expanded gambling -- and new or increased taxes on the industry -- as revenues shrink because of the weak economy.

New Jersey, facing a $5-billion budget gap, on Monday unveiled proposed tax increases that would raise about $135 million from casinos.

The casino revenue tax would be raised to 10% from 8%, an increase that would bring in about $90 million. An additional $45 million would be raised by taxing complementary rooms and meals given to high rollers.

The governor also proposed a new 7% hotel tax, although it was unclear whether that measure would affect Atlantic City, which already has a citywide hotel tax.

Park Place called the proposed taxes “a prescription for disaster” that would halt recently renewed development in Atlantic City. Park Place estimated its annual taxes would rise nearly 25% under the plan.

The proposals must be approved by the state Legislature.