Budget Solution for Illinois: Tax Gambling, Not People

by Professor John Kindt

The Illinois budget would probably be balanced today, except for the $37.5 billion to $46 billion given away to Illinois gambling interests over the last two decades. Faced in 1990 with a choice between a continued consumer economy or a new casino/slot machines economy, Gov. James Thompson’s lame-duck administration chose gambling. During the same time period, Virginia rejected casinos/slot machines and today has a budget surplus.

The original ten Illinois licenses, which were worth a fair market value of over $5 billion in 1990 ($9.5 billion in 2012 dollars) were granted for $25,000 per license to political insiders-including one casino owner recently convicted in the Gov. Rod Blagojevich scandals. Since 1990, Illinois has tagged the proposed new 2011 casino licenses at $150,000 each-when they are really worth billions of dollars.

The 2011 state income tax increase of 66 percent has occurred after years of tax decreases on Illinois gambling. By comparison, the recent reduction of healthcare benefits would save Illinois $788 million-at most. Illinois tax policy appears to be: “Tax the vulnerable to enrich the gambling owners.”

In Canadian casinos, the taxpayers keep virtually 100 percent of the casinos’ profits, while paying only “management fees” to the gambling companies. By comparison, in Illinois the casinos ship over $1.2 billion per year to their Las Vegas and headquarters offices. To emphasize the patriotism of the gambling interests it should be noted that after 9/11 when the U.S. Congress passed the Economic Stimulus Act to revive the U.S. economy, an Illinois Congressman slipped a provision into the Act which granted the gambling interests a $40-billion tax write-off for “slot machines” (and he was asking for a $133-billion write-off).

Concerned with these developing scenarios and encouraged by overwhelming bipartisan Congressional support, Illinois Senator Paul Simon sponsored and enacted the U.S. National Gambling Impact Study Commission. Among other recommendations, the 1999 U.S. Gambling Commission recommended a moratorium on the expansion of any type of gambling anywhere in the United States, as well as the re-criminalization of slot machines/electronic gambling machines (EGMs) convenient to the public. These conclusions have been strongly re-confirmed in the multi-volume 2009-2012 U.S. International Gambling