Hey, sorry to hear about your gambling losses.
What, you don’t gamble? No matter; if you’re paying taxes in Illinois, you’ve come up a loser. You just might not have noticed yet. Given our daily dose of previously unimaginable bad news, it would have been easy to miss the fact that on June 30, Governor Pritzker signed the legislation that’ll finally allow a casino to be built and operated in Chicago.
What he approved, however, was not the fair and friendly-sounding city-owned casino Mayor Lori Lightfoot campaigned on. That idea pretty much disappeared the moment she was elected.
It’s also not the three-way equal profit-sharing deal that emerged in Springfield last summer, while private ownership also somehow slipped into the mix. Under that plan, the casino's adjusted gross revenues (the money left after winning bets are paid) would be evenly split—33.3 percent each—between city, state, and the newly integral private owner.
The legislature passed (and the governor signed) something close to that deal last summer. It was loaded up with a jackpot of benefits for entrenched gambling industry owners—a massive expansion that more than doubled the number of gaming positions in the state and lowered taxes on existing casinos, but it guaranteed the city 33.3 percent of adjusted gross revenues.
But, oddly, it didn’t bring a casino to Chicago. While it looked like a done deal, and a public conversation was immediately launched about which Chicago neighborhood would land it, the fact was that the fine print included a stumbling block big enough to keep the equal profit-sharing—touted as exceptionally generous to city and state—from happening. The obstacle: a mandated feasibility study, conducted by a Las Vegas consulting firm. The study concluded (surprise!) that the government share of profits under the three-way split was so generous as to be “onerous”: no private owner would want the deal.
Since investors have been salivating over the prospect of a casino in Chicago for decades, it might have been interesting to test that conclusion by giving them a chance to step up, but that didn’t happen. The study was accepted as fact, and Lightfoot had an excuse to create a much less equitable plan.
What we wound up with, in the recent revision to last year's law, is a graduated tax structure that drastically reduces the share of profits for both city and state. It’s bafflingly complicated, but, for example, the city’s share of the first $25 million from slot machines (the main source of casino revenue) will be just 10.5 percent, and the state’s share will be 12 percent. Only if the casino makes more than $1 billion annually on slots, and only on the tiny slice of that revenue beyond $1 billion, will the graduated rate exceed what the 2019 law would have yielded for the city.Looking for someone who could shed light on this, I reached out to University of Illinois professor emeritus John W. Kindt. He was in Atlanta, having just testified on the subject of gambling at the Georgia state legislature.
“I think Mayor Lightfoot has caved in to the gambling lobbyists and to their little game of continually lowering their own taxes,” Kindt told me. Chicago should look to Canada, where the government owns most of the gambling facilities, he says. “The same companies complaining that their taxes are too high in Illinois are working on management contracts there, and happy to get a small management fee.”
The value of a casino license now, especially one in Chicago, is probably close to one billion dollars, according to Kindt. But, he says, "committees in the Illinois legislature are stacked with progambling people and their buddies. They don’t care about the facts or the finances. The first ten Illinois casino licenses, back in 1990, were worth about $500 million each. They were given away to political insiders for $25,000 each.”
As for the graduated tax scale, which he says is structured so they’ll “never or barely” hit the highest rate: “That’s all legerdemain—sleight of hand to keep people guessing what they’re really paying in taxes.”
The law passed last summer also legalized online sports betting, a major step on the path to the virtual casino of the future. “The goal of the industry is to put 24/7 real-time gambling on everybody’s cell phone,” Kindt says. The Illinois tax on the profits from this sure-to-be immense online handle? A paltry 15 percent.
Kindt, who's been analyzing this stuff for decades, says, “The people of Illinois should be outraged.” v