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Back To Work

Earlier today, Ohio Gov. John Kasich released an agreement he reached with Rock Ohio Caesars, ending a month long dispute between the parties that had resulted in casino construction stoppage.

The gaming giant suspended construction of casinos in Cincinnati and Cleveland in order to protest a tax measure Gov. Kasich sought to include in the state’s budget; namely, the 0.26% Commercial Activity Tax (CAT) imposed on all wagers placed in the casinos, regardless of amounts paid for winning wagers.  This levy on casino revenues would have been the first in the United States not to reduce the tax base by paid winning wagers.  Given the obvious difficulties the casinos would have faced administering the tax, and, more importantly, the unpredictably high tax dollars at stake, I didn’t blame Caesar’s at all for making this move.

If you read the agreement, you’ll realize Caesar’s in part got what it wanted: modification to the CAT formula.  The CAT will be imposed on total wagers less winnings paid.

In my opinion, this result is significant not only for the parties involved, but also the U.S. internet gambling industry as a whole.  Various bills for the legalization of internet gambling are currently being drafted at both the federal and state levels.  Of course, a major selling point to the skeptics of legalization is the amount of tax revenues to be generated.  If Kasich and Caesar’s had agreed to his CAT formula, then I believe it would have been more likely for federal and state legislators to seek a similar internet gambling taxation framework in the form of a deposit tax.

Whether or not Kasich sought to impose the CAT according to his definition simply as a bluff in order to squeeze as many dollars as possible out of Caesar’s, we’ll likely never know.  Indeed, Caesar’s could have taken Kasich to court to challenge the validity of the tax.  Instead, sidelined casino construction workers in Ohio can now get back to work.  I think I can even hear them happily humming along to this classic:

[youtube=http://www.youtube.com/watch?v=7SCt8JPAkgU]

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