Wednesday Casino Q&A: What type of tax rate would Harrah's pay the state?

07:00 AM EST on Wednesday, November 1, 2006

By Scott Mayerowitz
Journal State House Bureau

Each day this week, The Providence Journal will pose and answer questions about the proposed West Warwick casino. Readers are invited to submit their own questions at projo.com. We will select representative questions to answer in The Sunday Journal. Past questions can also be viewed online.

Q: What type of tax rate would Harrah’s pay the state?

A: Nobody knows. Lawmakers passed legislation setting up a tax rate in 2004. But this time around there is no such measure. If the constitutional amendment passes, legislators would negotiate a tax structure with Harrah’s.

Q: What did lawmakers and Harrah’s agree to in 2004?

A: At that time, Harrah’s would have had to pay a $100-million licensing fee in three annual installments. Harrah’s would also pay the state 25 percent of all gambling revenues up to $400 million. After that, the tax rate would increase in steps based on how much extra revenue the casino would bring in. If revenues were at $1 billion, Harrah’s would have paid an effective tax rate of 28.7 percent.

Q: How much money would the state see from the casino?

A: Harrah’s estimates that its casino would generate $448 million in gambling revenue the first year, $504 million the second year and $560 million the third year. The state would get $113 million, $128 million and $144 million.

Q: Would Harrah’s pay any other taxes?

A: Yes. The company would have to pay state sales, payroll, hotel and corporation taxes. In addition, in 2004 lawmakers negotiated a $1-a-night, per-room occupancy tax that needs to be paid whether a paying guest occupies a room or the casino gives it away for free.

Q: Where would the money from the casino go?

A: The constitutional amendment calls the casino “proceeds to be dedicated to property-tax relief.” It however does not specify what that means. Lawmakers would decide how the money would be distributed, possibly to municipal governments, possibly directly to taxpayers. Casino opponents have questioned whether lawmakers might cut existing property tax relief, leaving residents essentially with no net gain.

Q: What tax rate do Lincoln Park and Newport Grand pay?

A: Both give the state a little more than 60 percent of their revenues.

Q: How much money is that?

A: The state got $205.4 million from Lincoln Park and $49.2 million from Newport Grand last fiscal year. Gambling is the state’s third largest source of revenue, after personal income tax and sales tax.

Q: How much money did Connecticut see from its casinos?

A: The two Indian casinos give the state 25 percent of all slot revenue and nothing from the table games. Foxwoods provided $204.5 million last year and Mohegan Sun $223 million.

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