Analysis of I-892 shows there's no free ride
Tuesday, September 28, 2004 7:03 AM PDT
Printable version
E-mail this articleMukilteo businessman Tim Eyman was dismissive of a Sunday report in The Seattle Times that calls into question the predicted benefits of his gambling-expansion/tax-reduction Initiative 892. "They are doing everything they can to knock this (initiative) down," he said of state officials and gambling experts cited in the report.
Perhaps. But up to now, voters have seen only the calculations of those who are doing everything they can to pass this Nov. 2 ballot measure. Calculations of the state budget office and state Gambling Commission easily have as much credibility. Probably more, given the resources of the two agencies.
What becomes immediately clear from their analysis is that I-892 is not the "win-win" proposition its sponsors would have voters believe it is. It's not going to reduce property taxes by $400 million per year without costing government a penny," as Eyman has predicted.
Supporters have touted the initiative as a way to cut taxes without cutting government services or programs. The initiative would do this, they maintain, by expanding gambling to allow electronic slot machines in non-tribal minicasinos, taverns and other private establishments, taxing the proceeds at a rate of 35 percent and reducing state property taxes the following year by the amount raised through the new gambling tax.
Both the state budget office and Gambling Commission doubt that the initiative would reduce property taxes by anything close to $400 million.
That projection is based on a predicted daily net profit of $175 per machine, with the machine paying out 75 percent of its revenue in prizes, according to the Seattle Times. Gambling Commission officials say a 75 percent payout, which is the minimum required by law, is too low to keep players coming back. Even with a higher payout, commission officials estimate the net daily take per machine at just $115.
If the gambling experts are right, the state could expect around $267 million annually. This is before any administrative expenses are subtracted from the taxpayers' portion of new gambling revenue.
Then there are the "hidden costs" of this initiative cited in the Seattle Times report. Many gamblers could be expected to put their money into these popular machines rather than the state lottery, pull-tabs or bingo, which generate tax revenue for local governments.
The commission predicts that local gambling revenue could be reduced by as much as $8.4 million by 2009, if this initiative passes.
These calculations only confirm the obvious. There's no free ride, however much proponents of this initiative argue to the contrary.
Past Month's Most Commented Stories