Inside Asian Gaming

March 2009 | INSIDE ASIAN GAMING 25 how its prudent expansion strategy has placed it in a “safe, comfy position.”Work at the MSC site, on the other hand, appears to have ground to a halt, and the prevailing sentiment is that it could be delayed beyond its rescheduled 2011 arrival and faces serious bankruptcy risk. Bankruptcy risk is not limited to corporations. State governments across the US are facing funding crises, as income and real estate tax receipts fall and outlays for unemployment insurance and health coverage rise. Local authorities around the country are closing libraries and other municipal services. From February, California suspended tax refunds, welfare cheques, student grants and other payments owed to Californians. The state funding crises have led to several creative revenue-raising proposals. Lastmonth, amember of the California State Assembly proposed a bill to legalise and tax marijuana sales. InWashington State, which faces a US$6 billion funding shortfall, a legislator is calling for an 18.5% tax on the sale of adult entertainment products and services, like phone sex. Various initiatives to tax vice industries are popping up across the country. Taxing so-called vice industries is an attractive revenue-raising solution for politicians, not only because it can be presented as a means to deter undesirable behaviour, but also because consumption of vice is considered less sensitive to price increases than consumption of other goods and services. Not so recession-proof Gambling, like marijuana, porn and other so-called ‘vice industries’, is considered recession-proof to some degree, and the decline last year in casino revenue across the US is viewed as a sign of just how far consumer confidence has sunk there. In 2008, Nevada’s casino revenue slumped 10% year-on-year to US$11.6 billion. It marked one of only three years that Nevada’s casino revenue has fallen year-on- year since 1955. The other two years were 2001 and 2002, when Americans curtailed their leisure travel following the 9/11 terrorist attacks. The fall in 2008 was also much larger than the falls in 2001 and 2002, of 1.3% and 0.3%, respectively. Although US casinos are hurting, they remain easy tax targets. Funding shortfalls will pressure the states where casinos are legal to raise their gaming tax rates. Other states will reconsider proposals to lift their bans or restrictions on casino gaming as a means to generate much-needed additional income. Nevada’s casinos enjoy the lowest gaming tax rate in the country, with a maximumof 6.75%of gross gaming revenue, and additional fees and levies imposed by counties, municipalities and the state adding approximately 1% to the tax burden. The highest gaming tax rate is paid by the nine riverboat casinos operating in the state of Illinois, graduated from 15% to 50% of gross revenue. The state also collects a $2-3 per patron admissions tax. Casino gaming aboard riverboats was officially legalised in Illinois in January 1990, with gaming operations authorised to begin by April 1991. It was a case of covet thy neighbour. Iowa, which sits just to the left of Illinois along the Mississippi River, legalised casinos a year earlier, in 1989. Passage of the bill through the Illinois legislature was helped by the fact that many Illinois residents were crossing the border to Iowa to use its riverboat casinos. From Iowa and Illinois, the riverboat casino legalisation wave spread to three other states along the Mississippi River—the country’s longest river—including Missouri, Louisiana and, of course, Mississippi. Only one other state has legalised casino gaming aboard riverboats: Indiana, which sits to the right of Illinois. Although riverboat casino operators in Illinois are taxed at a higher rate than those in Iowa and Indiana—where the graduated maximums are 22% and 35%, respectively, compared to Illinois’ 50%—they are not calling for a gaming tax cut. Instead, they want the state to lift the smoking ban it imposed on them at the beginning of 2008. They claim the ban led to their revenues falling more steeply than those of riverboat casinos in neighbouring states and deprives Illinois of much-needed tax income. On the Illinois-Iowa border, for example, riverboat casino revenue was down 13.2% last year on the Illinois side but up 3.1% on the Iowa side. Revenue fell 21% in northern Illinois, but only 4.8% in nearby northwest Indiana. Singapore swing Singapore may have coveted both the spectacular economic boomcreated by the liberalisation of Macau’s casino industry and the sizeable revenues generated by In Focus The Grand Victoria casino riverboat in Elgin, Illinois, is permanently docked