Casinos, GOP lock horns

COLUMBUS

The official stare down between Gov. John Kasich’s administration and casino operators began last week, when two of the latter halted construction on their gaming facilities.

The move came after months of pointed comments by the governor about the sweet deal voters gave casinos to open shop in Ohio’s four largest cities and after the Ohio House included language in its version of the budget that would increase those casinos’ tax bills.

Kasich has made it clear that he thinks casinos should pony up more money in this time of economic distress. “I’m all for the casinos, I want them to open,” Kasich told Statehouse reporters last month. “But I am not going to slap together another raw deal for the taxpayers of the state. ... This is the last time that the taxpayers of this state are going to have leverage. And we want to make sure in a tough budget time that there’s a way for us to be able to get some more resources.”

State’s leverage

The leverage of the moment is the state’s commercial-activity tax, created by lawmakers as part of a larger reform package. It applies to businesses’ gross receipts “for the privilege of doing business in Ohio,” according to a memorandum from the state Legislative Service Commission. Back when the CAT was created, there were no Ohio casinos, and lawmakers at the time weren’t questioning the wisdom of applying the tax to casinos gross receipts (that is wagers) versus the difference between what is wagered and what is paid out to patrons in winnings.

The Legislative Service Commission, in a memo to lawmakers last month, said the CAT seemingly already applies to casinos gross receipts.

But Republicans in the Ohio House, wanting to erase any doubt, included language in the state’s $55.6 billion biennial budget specifying that intent. Whether it remains in the budget or not, the issue likely is headed for a court battle.

In the meantime, casino operators have been given the green light by voters to build on specific sites in Cleveland, Columbus, Cincinnati and Toledo. The CAT issue prompted the developer of two of those sites — in Cleveland and Cincinnati — to halt construction, while the developer of the other two issued a warning about the potential impact of lawmakers’ decision.

“This unique and discriminatory tax hike on the casinos — which we believe is patently unconstitutional — will likely have severe consequences on our more than $1 billion planned investment in Ohio and the 34,000 jobs we were hoping to create,” Eric Schippers, senior vice president of public affairs for Penn National, which is building the casinos in Toledo and Columbus, said in a released statement. “In a state that has lost 500,000 jobs in the last decade … we are flabbergasted by these continued anti-business attempts to increase taxes on the statewide voter-approved casinos. What kind of message does this send to other businesses seeking to invest in Ohio?”

It’s an interesting dilemma.

Bargaining chip

On the one hand, the CAT appears to be the only bargaining chip Statehouse Republicans have to force casinos to pay a little more into the state’s coffers. If they are successful, the casinos would recoup those funds through the gambling activities of Ohio taxpayers with poor math skills.

On the other hand, if lawmakers cave and remove the CAT threat, casinos will redouble their efforts to open shop in Ohio, thus reaping untold fortunes through the gambling activities of Ohio taxpayers who don’t fully grasp the laws of probability.

Either way, Ohio taxpayers lose.

Marc Kovac is The Vindicator’s Statehouse correspondent. Email him at mkovac@dixcom.com or on Twitter at OhioCapitalBlog.