The Tax Debate Behind Gambling In Maryland
MR. KOJO NNAMDI
From WAMU 88.5 at American University in Washington welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. Later in the broadcast, banks behaving badly and what consequences they now face, but first, four years after Maryland voters gave slot machines the green light, the state may add another casino and introduce table games like blackjack and poker.
MR. KOJO NNAMDI
In the bargain, state lawmakers are also looking at deeper tax breaks for the existing casinos to offset competition from a new Las Vegas-style casino that could open in Prince George's County. Maryland Governor Martin O'Malley has called a special session to consider expanding gambling in the state and cutting taxes for casino owners, a measure the House of Delegates will consider this afternoon.
MR. KOJO NNAMDI
But skeptics say it's too soon to know what the competition will be like and too early to cut into the state's share of gambling revenue to protect casino owners. Joining us from studios at the Baltimore Sun is Andrew Green. Andy Green is opinion editor at The Baltimore Sun. Andrew Green, thank you for joining us.
MR. ANDREW A. GREEN
Happy to be here, Kojo.
Andy, the Maryland House of Delegates is meeting today to consider expanding gambling in the state by allowing a sixth casino and adding games like poker and blackjack to the slot machines that are already committed. What or who is driving the move to expand gambling in Maryland?
The short answer is Senate President Mike Miller, who is always the primary mover for any gambling-related business in the state. But he's picked up some key allies this time around that have really helped this idea gain traction. Primary among them is Prince George's County executive Rushern Baker.
Prince George's Country historically has been very skeptical of gambling. In fact, in the first go-round for Maryland's gambling bill five years ago, they were left out because the delegations there were firmly against it. The County executive was against it. Times have changed.
Mr. Baker back in his days in the Legislature was actually an opponent of gambling too, but now he's seen what it's like to try to balance the budget during a recession or whatever it is that we're still in here and he has become a convert. And he has been pitching the idea of a gambling palace on the Potomac over at National Harbor and he's got the developers of that property on board and MGM, the giant multi-international casino firm is planning to build there if this all goes forward and so that has made a major difference.
And the one thing sort of flows from another, the drive to get the Prince George's casino is why table games are being considered right now. First of all, in order to have the kind of casino MGM wants, they need table games and also the thinking is the table games is kind of a sweetener to help get the other casinos in the state on board.
800-433-8850 is our number here. If you'd like to participate in this conversation, you can call us at 800-433-8850. How do you feel about cutting taxes for casinos to protect their profits in the face of greater competition? 800-433-8850 or send us email to firstname.lastname@example.org. Our guest is Andrew Green, opinion editor of The Baltimore Sun.
Andy this proposal would give casino owners deeper tax breaks to compensate them for the greater competition from that aforementioned proposed new casino in Prince George's County. Is there any evidence that a new Las Vegas-style casino at National Harbor would cut into the profits of the existing casinos?
Well, evidence is something that's in very short supply in this whole debate. The Maryland Live! Casino, which is the one at the Arundel Mills Mall and is and would be the state's biggest casino has been open for about two months now so we don't know a whole lot about what its performance is going to be like, what its market is going to be like.
Although we do know that since it opened, the casino in Perryville, which is owned by Penn National Gaming, has seen its revenues drop by about a third. Now, of course, we've just recently had a license approved for a Baltimore casino. Construction there has not begun. It wouldn't open until sometime in 2014. That one would be operated by Caesar's and would also be a very big, though not quite as big as the Arundel Mills casino.
It's only 13 miles away from the Arundel Mills casino and we have no idea what the competitive relationship between those two things would be. And certainly, well, everybody is passing around estimates of what would happen if we put another big casino in Prince George's County. Nobody really knows either what that would do to the market.
The assumption is that, you know, there is a finite amount of gambling that's going on and adding a new casino to the market would certainly impact the revenues for the existing ones, how much we just don't really know. Estimates vary by wide degrees.
I guess you have to forgive me or forgive people if we feel like this is giving casinos taxpayer money so they can stay in business, to take more taxpayer money. Obviously, it's not technically that. It's about offering them the kinds of tax cuts that can increase their profits in exchange for well, taking dollars from taxpayers.
For some reason or the other it never seems to come out right when I say it.
Bear in mind that we at The Sun have said that this whole thing is a bad idea, that we should wait a while before we go down the road of expanding gambling. But that said, I'll try and lay the rationale that people use to explain why this makes sense.
They think that by adding a sixth casino, the state can increase the total amount of gambling dollars that come into the state. They think it's going to draw a lot of people from D.C. and from Virginia and even points south because really, there are no casinos going south from there for a very, very long way.
And if they do that, however the concern is that the success of that casino could make the Baltimore and Arundel casinos not financially viable if they don't do anything to compensate those owners for that new competition. We only benefit as a state if the casinos are operating well, they're viable and their owners have the money they need to invest in maintenance upkeep, marketing, new games, all that sort of stuff.
So there is some reasonable policy reason to say if we're adding competitors to the state we need to adjust the splits so that the casinos all stay financially strong. How much you need to adjust is anybody's guess.
Well, I guess the argument is that deeper tax breaks for casino owners will affect the amount of gambling revenue that the state gets each year because if they are all allowed to stay, there's going to be an overall increase in the amount of revenue. But if one or the other fails, there's likely to be an overall decrease in the amount of revenue?
Or it's possible, I mean, casinos do go bankrupt. It's not unheard of. You'd think that's a business you can't lose in, but in fact, you can. And the question, though, is how much will the pie increase and how much do you absolutely -- you know, how much can you lower the tax rates and still make this work out for the state?
And the House of Delegates Committee, that's handling this yesterday, just approved even steeper guaranteed tax cuts for the existing casino owners than had previously been considered before. How the full House will react to that, I don't know. We'll find out later on today.
And we're taking your calls at 800-433-8850. Have you played the slot machines at one of the casinos in Maryland? Would you like to see table games like blackjack added to the slots? What do you think about the proposal to open a big casino at National Harbor in Prince George's County? 800-433-8850, our guest is Andrew Green, opinion editor at The Baltimore Sun.
Andy, talk about the politics here. In recent years, the Senate has been, well, enthusiastic about gambling while the House has been more reluctant. Are lawmakers maybe putting the casino owners' interests ahead of the state's interest with this plan?
Well, certainly, with the latest move in the House, it causes me to wonder a little bit who is driving the bus here because the people who are most concerned about making sure the casino owners get a greater cut in the tax rates are, of course, the casino owners, primarily the Cordish Company, which owns the Maryland Live! Casino and, you know, the question had been, what is driving the reluctance in the House?
Is it a reluctance to expand gambling or is it a concern that they are going to hurt Cordish and eventually the Baltimore casino? The deeper tax cuts suggest that it's that latter, that they're more concerned with keeping the casino owners happy than they are with making sure that Maryland's gambling program stays limited as it has been in the past.
On to the telephones here. We will start with Alex here in Washington, D.C. Alex, you're on the air. Go ahead, please.
Hi, how are you today? Thank you for taking my call.
This was for your guest. I wanted to know if you could elaborate please a little bit more on the players behind the scenes. You mentioned Cordish. You mentioned Caesar's and MGM. Will MGM and Caesar's, presumably both, have a stake in this game and if so, what's going on behind the scenes with those companies that are likely pushing this new development? If you could elaborate on that, if you know.
Well, I'll tell you what I know and I'm sure there's more that I don't. But MGM is in interested in getting in the market. And, you know, if you've been to National Harbor, you can imagine why that would be a good location for a casino, you know. It's a great location, right on the river, right across the Woodrow Wilson Bridge from Virginia, right outside of D.C.
You know, who knows where we would be now if that had been on the table five years ago. But in any case, they want to get in the market. They have said that they'll be willing to invest hundreds of millions of dollars in building a casino there.
Now Caesar's, meanwhile, is part of the group that has bid on the Baltimore casino. Even under the slots only approach, they said they are going to do it. However, the CEO of Caesar's came in and talked to us on The Sun's editorial board several weeks ago and he said, you know, look, for us, we can provide a much more competitive product and he suggests that it would be better for the city if they have table games, as well, because a lot of the advantage they have is, you know, a big gambling company, is they have these deep lists of their best customers.
And they can bring people in to, you know, see a Ravens game or an Orioles game and spend some time at the casino or come here for the Baltimore Grand Prix or what have you. But they can't do that with slots only because nobody travels to go to a slots parlor. So they're pretty eager to have table games.
Well, they thought that the governor's original bill was great. Presumably, they will like the House version even better. The Cordish Companies are the most upset about all of this. They claim that some 40 percent of their business is coming from Washington suburbs and D.C. and that they will be absolutely devastated if a Prince George's casino opens.
The other phantom player in all this is Penn National Gaming, which is a big casino company that owns the Perryville casino in Maryland, but more pertinently for them, owns the Charlestown Casino in West Virginia. And it is one of the most lucrative casinos around or at least had been until Maryland's gambling program came online.
They fought tooth and nail to try to stop the Arundel Mills Casino and they're going to do it again to try to stop a Prince George's County casino because they see that coming straight out of their bottom line.
Alex, thank you very much for your call. We move on now to Derrick in District Heights, Md. Derrick, your turn.
Hi Kojo, thanks for having me. Listen, my concern in all of this is that I'm not hearing a lot about the interests about the people who live in Prince George's County, in particular, that part of Prince George's County. It seems almost extorted on the part of the casino owners for us to continue to talk about deeper and deeper tax breaks just to do business in our county.
And we can look at the experience of Maryland Live! and see that when it's time for these things to be built, roadways are not sufficient or help the Beltway and the streets around the existing National Harbor are already insufficient to handle the traffic. And time and time again, developers are allowed to do projects, but then create problems that they're not responsible for, but the taxpayers have to live with.
Derrick, I'm glad you brought that up because, Andy, today's editorial in The Baltimore Sun says, "The goal should be to create a taxation and a regulatory scheme that maximizes the benefit to the state." And Derek would mean that means to the people who are residents of the state. What would that involve?
Well, specifically to Derek's question -- and that is an excellent point to bring up -- in Arundel Mills there were a lot of improvements that had to be made and the Cordish Company paid for those. Whether the same would be true in Prince Georges County has a lot to do with, you know, how the local development officials handle things down there.
A couple of points to make are number one, the casino in Prince Georges County, if it does get legalized, would still have to get zoning approval. And number two, the way this referendum works, the Prince Georges casino would only be authorized if a majority of Prince Georges' residents support casinos. So there are a couple of safeguards there.
But in any case, back to your question, Kojo, we need to figure out whether we're looking at the benefit of gambling solely in terms of the amount of tax dollars we get from the casinos and from the table games if they come online, or are we looking at this a little more broadly to consider economic development impacts of the gambling program beyond just the tax dollars. Are we looking at employment? Are we looking at hotel stays, you know, other ancillary activities that go along with it?
You know, if you're considering a sort of Las Vegas model of gambling there the tax rates on actual slots and table games are quite low but they think they come out ahead because of all the economic activity that the gambling industry there creates beyond just what happens at the tables. Are we going to go for that approach? If so, how do we measure this? How do we decide what tax rates are going to get us the best bang for the buck? You know, that's a discussion that we've not really had as a state. And the road that we're going down right now suggests we need to.
Have time for one more call. Here is John in Chevy Chase. John, you're on the air. Go ahead, please.
Thank you, Kojo, for taking my call. I'd like to know why the media has not given us more information about the success or failures of gambling in the neighboring states like Pennsylvania, Delaware, West Virginia, New Jersey.
In other words, are Rushern Baker's hopes likely to be realized or dashed, Andy Green?
Well, that's a hard bet to make, but I can say generally speaking, that as the caller was sort of alluding to, we're getting to a pretty saturated market in the mid-Atlantic. You know, back in the day is was just New Jersey that had gambling, and West Virginia, Delaware and Pennsylvania. Pennsylvania adopted a very large gambling program and got it online very quickly. They went from just slots to slots and table games in a very short period of time. They're now probably the heavyweight in the region.
So there is a fair question to ask, are we just slicing up the same pie in smaller and smaller pieces? Delaware and West Virginia recently felt a lot of pressure to expand their gambling operations in order to maintain the degree of revenue they were getting. Delaware actually just recently passed a bill that should move them into the realm of internet gambling, which could be a first in the nation. So it does seem like we're constantly chasing a limited pool of money every time we bring up gambling.
John, thank you very much for your call. You mentioned that the voters would be getting the final say in November. What are the odds on how this is going to turn out?
Well, I can tell you that it passed about 60/40 last time around so I think the odds are that whatever the legislature passes will get approved by the voters.
Andrew Green is opinion editor of the Baltimore Sun. Andy, always a pleasure.
Good to talk to you, Kojo.
We're going to take a short break. When we come back, Banks Behaving Badly and what consequences they may now face. I'm Kojo Nnamdi.
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