Harrah’s tax break would require big increase in riverboat winnings

Alan Sayre

Sunday, March 12, 2000 | 9:22 a.m.

NEW ORLEANS - If the Legislature reduces the big tax on Harrah's New Orleans Casino, it is unlikely the state could make up the lost revenue by allowing riverboat casinos to stay at the dock all the time, according to industry observers.

Recently, state Rep. Warren Triche, D-Thibodaux, told a legislative delegation luncheon in Larose that he expected the land casino's owner, JCC Holding Co., to ask for a reduction in its minimum $100 million state tax to either $40 million or $60 million.

Triche said JCC Holding probably would go along with unrestricted dockside gambling for all of Louisiana's riverboat casinos in exchange for the reduction.

The number of gamblers at the riverboats would probably increase if the boats never went sailing. But observers say it is unlikely the higher numbers would offset the loss from the big tax.

Casino taxes are a backdrop to the current state budget problem and various solutions to curb it, including spending reductions and new taxes.

There has been widespread speculation since Harrah's opened in late October that the casino would ask for a tax break. The $100 million must be paid each year, no matter how little the casino wins from gamblers. As a result, the casino is now paying a tax rate of above 50 percent.

Recently, Harrah's Entertainment Inc., which owns 43 percent of JCC Holding and is the guarantor of the state tax, began making the required daily tax payments for the casino. JCC Holding said that would free money to allow it to continue developing the casino.

JCC Holding will not say whether it will seek a tax break. Riverboat casinos pay a flat tax rate of 18.5 percent of winnings from gamblers:

Under the two tax figures mentioned by Triche:

Only the four riverboat casinos in Shreveport-Bossier City are allowed under current state law to have unlimited dockside gambling. Since the first boats opened in Louisiana in late 1993, owners have complained about the cruising law, saying it makes their casinos noncompetitive with dockside casinos on the Mississippi coast.

But enforcement of the cruising provision for other boats in Lake Charles, Baton Rouge and the New Orleans area has been sparse because of the captain's authority to stay dockside for almost any weather- or safety-related reason.

Because of that, there's little chance that riverboat revenue would increase substantially - at least enough to make up lost Harrah's taxes - because of dockside gambling, said Larry Pearson, publisher of the Riverboat Gaming Report.

The presence of Harrah's gives little hope to the New Orleans-area riverboats of additional revenue, while the Baton Rouge casino market is largely tapped out, he said. The pair of two-boat complexes in Lake Charles, which typically have one boat dockside while the other sails, probably would benefit the most, Pearson said.

"I would doubt that we would see a revenue-neutral situation," Pearson said.

Gambling critic C.B. Forgotston said the Legislature and Gov. Mike Foster would be hard-pressed this year to give any tax break to gambling if other business and individual taxes are raised.

"I don't think you could even sell a revenue-neutral plan," he said. "They have to raise the actual tax to increase the amount. If they raise real business taxes and don't raise gambling taxes, that would be ridiculous."

Sen. James David Cain, D-Dry Creek, has been floating a plan to raise the riverboat casino tax to 28.5 percent, an idea that Pearson predicted would not get far because of the large number of lawmakers in riverboat markets.

Instead, Pearson said the state should start pressing Louisiana's three tribal casinos to make a contribution, such as in Massachusetts, Connecticut, Michigan and South Dakota. Although the state cannot tax reservation casinos, states and tribes can make an agreement by compact for a share of the proceeds.

The three tribal casinos probably win $500 million to $600 million a year from gamblers, Pearson said. Those casinos are not required to report their winnings publicly.

"Of all the places we can get tax revenue, that's the most logical," Pearson said. "That's where the deepest pockets are. I don't know where else we can get that kind of money."

Pearson said he doubted that JCC Holding would ask for a tax break this year because of the overall state budget situation and the possibility of other tax increases.

"I think they will test the water," he said. " I'm not sure they'll bring any tax break measure up to the floor."

Forgotston said any proposal or combination of proposals involving gambling taxes will be a key political test in the Legislature.

"If they raise additional revenues on real businesses and individuals in this state and they don't significantly increase the revenues from gambling, I think you'll know who the King Kong is in this state," Forgotston said.