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* A new income tax isn’t the only graduated tax Gov. Pritzker has proposed this year. From his budget book…
More than 30,000 video gaming terminals (VGTs) operate in almost 6,800 locations around the State of Illinois. Many of the video gaming operations are single site operations while others may be numerous separate LLCs underneath a larger parent entity. These larger entities may be operating hundreds of video gaming machines at scores of locations around the state, yet they pay the same tax rates as the smaller single-site operations. In riverboat gambling, the state accounts for differing market sizes through a progressive wagering tax. Video gaming should do the same. The new structure will require combined reporting of net terminal income at the parent entity level. The Governor proposes that marginal net terminal income that exceeds $2.5 million per year be taxable at a 50 percent rate rather than the current 30 percent rate.
On the surface, at least, that’s a good idea. The ubiquitous chain video gaming outlets and the “operators” who install the devices all over the state should pay a higher tax rate. The small places, however, should be protected from higher taxes.
One problem, though. The operators and the video gaming outlets split the after-tax proceeds down the middle. So, when the state raises taxes on high-earners, there’s a smaller pot to split and that will reduce the take for the mom and pop operations.
Smaller establishments are not happy…
Barry Gregory owns Crehan’s Irish Pub and Banquet Facility in Belleville. Installing video gaming terminals in his business allowed him to make a number of investments that he wouldn’t have been able to otherwise do after the state’s smoking ban curtailed business.
“The very next day we gave our staff a pay raise, we’ve completely redone the outside of our building,” he said. “It’s been very helpful.”
He’s among the business owners who signed on in support of Bet on Main Street, a coalition opposed to the governor’s proposed tax hike on gambling operators that supply bars, VFWs and other establishments with terminals.
* Again, this is a graduated tax that’s supposed to hit the high-earners, but the lower-earners will also feel the pinch…
Randy Rehmer, owner of Waterloo’s Double R Bar just south of East St. Louis, says raising taxes on video gambling will eat at the $70,000 he makes each year off the machines alone.
Besides bringing more customers to his business, Rehmer says video gambling revenue has helped him remodel the building, hire an extra employee and give his staff pay raises.
“I’ve got nothing against raising the minimum wage,” Rehmer said. “But the state is telling me to pay people more at the same time that it takes money away.”
Rehmer joined several other small business owners at a news conference Wednesday morning. He was referring to a possible tax increase on video gambling terminals
My suggestion: Do the 50/50 split between operators and establishments before the graduated tax is imposed. The mom and pops shouldn’t be hurt by this tax.
posted by Rich Miller
Wednesday, May 8, 19 @ 2:11 pm
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Math is hard. Glad we have you to do it for us, Mr. Miller.
Comment by Whatever Wednesday, May 8, 19 @ 2:23 pm
I wonder how the mom and pop stores in Missouri is fairing without slots at bars and restaurants. Illinois businesses can’t catch a break.
For people against Marijuana, this will be a huge boost for the state and bringing in outside revenue from other states. Surrounded by five. Get Marijuana done.
Comment by Almost the weekend Wednesday, May 8, 19 @ 2:23 pm
The State should be taking a higher percentage to begin with. A lot of people making more coin than ever on the backs of poor people gaming.
Comment by Shemp Wednesday, May 8, 19 @ 2:28 pm
These gaming machines should be limited to American Legions and VFW organizations. A lot of Main street businesses would benefit from fewer one-armed-bandits in their communities.
Comment by Al Wednesday, May 8, 19 @ 2:32 pm
I fall under the category of a ‘Mom and Pop” location. As has been stated, the establishment and the VTO, or owners and servicers of the machines, split 50/50 the remaining 70% of the Net Terminal Profits. The establishment is responsible for all the operating costs, including occupancy…rent, insurance, taxes.
The establishment also pays for all payroll costs, and all food and beverage giveaways cannot be reimbursed to us by our “gaming partners” the VTOs as stated by the gaming board. The VTOs pay for, install and maintain the machines. All marketing costs are split. The more machines the VTO has under contract, the greater economies of scale and thererfore greater profits… and with little to no risk.
An Illinois casino has 1200 gaming positions, with hundreds of millions in building and property costs, millions in licensing fees, payroll, marketing, promotions and giveways…and with a tax up to 50%. Now think of a VTO with over 5,000 machines and whose only responsibility is to keep the machines running and to stock and deposit the cash. The VTO are behind the pushback against an increase in taxes, and who’s pushing the “Bet on Main Street” lobbying.
If there is an expansion of gaming, allowing for more casinos, why would a casino want to pay the fee and build and staff a casino when they could just by a VTO, allowing these operators to reap millions in profits. As national casino operator, Penn Gaming did with Prairie State Gaming.
Rich Miller is right with his suggestion to impose a graduated tax on VTOs AFTER the split.
Comment by Mom and Pop Wednesday, May 8, 19 @ 2:39 pm
Stop increasing taxes. Today, the VGT people say raise our fees instead of taxes. Good way to go.
Comment by Hey You Wednesday, May 8, 19 @ 4:08 pm