Panel: $650M in untaxed Ohio gambling freebies need review

COLUMBUS, Ohio (AP) – Failing to tax more than $650 million worth of promotional freebies at casinos and racinos has been a direct hit to Ohio’s school districts and local governments, and the practice should be reconsidered, a divided legislative panel recommended Monday.

In its strongly worded report, the Joint Committee on Gaming and Wagering urged state lawmakers to consider revoking tax exemptions to the gambling parlors “to protect the interests of Ohio’s schools, local government, and taxpayers.”

A technical analysis of spending and revenue data since 2012 didn’t bear out industry claims that offering free money to customers ultimately increased taxable income at Ohio gambling houses, the report said. The analysis, conducted by the office of state Sen. William Coley, a Middletown Republican who chairs the committee, showed no pattern between how much a casino spent on promotional freebies and its overall revenue.

“The results raise serious questions as to whether it is in Ohio’s best interest to continue with the current tax exemption on promotional play,” the report said.

Penn National Gaming spokesman Bob Tenenbaum said the casino operator strongly opposes elimination of promotional spending tax credits.

“Any change in the current promotional tax credit would, as we told the committee, negatively impact casino revenues, hinder the growth of the industry in Ohio, and make it more difficult for Ohio gaming facilities to compete with those in neighboring states,” he said. Tenenbaum said that would drive customers to facilities in Pennsylvania, West Virginia, Indiana and Michigan that Ohio’s casino legalization decision aimed to avoid.

The report called that argument “specious” – though at least one legislator who signed onto it said he is sympathetic to the casinos’ position.

“I don’t support the recommendation to tax promotional items,” said state Rep. Stephen Slesnick, a Canton Democrat. “That kind of gives a leg up to Ohio’s casinos that allows them to offer a special opportunity to people who want to go and gamble.”

Of 26 states that offer commercialized gambling, Ohio is one of nine that neither limit nor tax promotional spending, the report said. Nine others cap promotional spending, and the remaining eight tax promotional spending as they do other dollars wagered.

Tax exemptions for Penn and Rock Gaming were contained in separate memorandums of understanding struck with Gov. John Kasich in 2011, after Ohio voters legalized casinos in 2009. The tax exemption for promotional spending at Ohio’s seven racinos, horse racing tracks authorized to operate slots-like video lottery terminals, were granted in 2012 legislation overhauling gambling laws.

The oversight committee said those laws still need improvement. Despite having four separate entities that enforce gambling laws – the attorney general’s charitable gambling office and the state casino, racing and lottery commissions – the jackpot game Queen of Hearts “has slipped through the cracks” and is not regulated, the panel found. The state’s most popular such game is held in Mahoning County.

The panel urged the Legislature to temporarily place the game under the authority of the casino commission, then study the idea of streamlining oversight into fewer agencies.

The committee said its members – the Legislature as a whole – need to spend more time determining how to handle fantasy sports websites, such as DraftKings and FanDuel, which Nevada board dubbed “gambling” in October.

The report said several newer lottery games – Keno, Keno Booster, Multi-Purpose Next Generation (MPNG) and EZPlay Tap – are doing well and should continue to be monitored. Since Keno was introduced in 2009, it’s shown consistent growth. Keno and Keno Booster sales totaled $329.5 million in fiscal 2015, up 11 percent.
(Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

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