Putting the squeeze on Iowa's casinos

Gov. Terry Branstad's proposal to cut corporate tax rates in half while boosting casino taxes to 36 percent hasn't gained a lot of traction. However, the scheme, intended to spur job growth for small businesses, is getting some pushback from those who fear their jobs will be on the line if casino taxes rise. Casino operators have suggested that  squeezing as much tax revenue out of them as possible will lead to layoffs and even closing some of the 17 state-licensed businesses. (In the case of Isle Casino & Hotel Waterloo, operators and the association that holds its license are warning it could lead to a smaller amount of donations for area projects.) It's a delicious irony that Branstad, who campaigned on a pledge to create 200,000 jobs in Iowa by cutting the corporate tax rate, has that factor complicating his proposal. It's likely that Branstad sees casinos as a "lemon" in economic development terms. Some have argued that casinos don't really help a state's economy, only diverting money that would otherwise be spent on different entertainment options. The casino component of Branstad's plan is intended to fill the revenue gap that will occur with lower corporate tax rates. (And of course, those newly-created jobs will bring in more tax revenue for the state.) Branstad professes not to want to hurt casinos, but believes they have done well enough to handle a little subisdy for his trickle-down experiment. It's easy to imagine, though, that community boosters will side with their area's casino rather than support Branstad's proposal. After all, why trade actual jobs at a local business for the possibility of jobs that might be created by letting some unnamed corporations pay less in taxes? There's no guarentee any lost jobs will appear in your own community. That could make it hard to convinice lawmakers to support the proposal.

Casino taxes --- Branstad's ace in the hole

Gov. Terry Branstad has made good on a campaign promise to cut the corporate income tax in half. But his budget proposal doesn't ask anyone to put their faith in his "voodoo economics." The proposal, unveiled last Thursday, would allow corporations to keep $200 million more of their profits during the next two years under the theory that they will reinvest the windfall in such a way that it will "trickle down" to the state's unincorporated citizens. That will be sorely needed if legislators embrace another idea of his to cut $194 million from existing programs,  resulting in layoffs of up to 1,500 state employees. Anyway, another provision in the proposal ensures that skeptical legislators wouldn't have to go over to the supply side to embrace this budget. He's steeply raising taxes on a very specific type of corporate entity: casinos. Their tax rate would go from 22 percent to 36 percent, a 14 percent increase. Branstad estimates that the tax increase would raise $381 million in fiscal years 2012 and 2013. That is probably one of the few tax increases the socially conservative base he needs to keep happy wouldn't grumble about. But it's still going to find opposition from casino owners and possibly the charitable organizations that benefit from gambling license requirements to donate a percentage of their profits. The Black Hawk County Gaming Association, which hands out Isle Casino Waterloo's donations, has already sounded the alarm that their contract might be written in a way that a tax increase reduces the casino's contributions. It's still uncertain if the Iowa House or Senate will embrace this component of the budget proposal.

Gaming the system

Don Hoth may head a gaming association, but handing out a percentage of the Isle Casino's profits has nothing to do with gambling. The Black Hawk County Gaming Association has been buying the good will of needy organizations in the region by dispersing 5.75 percent of its profits quarterly since opening. A portion of these profits are typically earmarked for organizations outside of Black Hawk County. But Hoth proposed the board suspend those grants and only make them to Black Hawk County while the association gears up for a November referendum that residents must approve for it to continue operating the casino. Sounds a lot more like vote buying than gambling. Read more at the following link from the Waterloo-Cedar Falls Courier:

http://www.wcfcourier.com/news/local/article_1995e628-0a8e-11df-a319-001cc4c03286.html?mode=story