OCPA column: Stitt right to seek review of casino fees

Stitt right to seek review of casino fees

by Jonathan Small

In discussions of tax policy, the issue of “fairness” often arises. So here’s a simple question. Is it fair to impose a larger tax penalty on people for drinking water than for operating a casino? If you’re among those who think running slot machines should be taxed at the same rate, if not higher, than what people face when trying to rehydrate on a hot summer day, you should welcome Gov. Kevin Stitt’s call to renegotiate Oklahoma’s gaming compacts.

In Oklahoma, the combined state-local sales tax rate on a bottle of water averages 8.94 percent, but the state fee on casino slot machines is just 6 percent. That’s not the only comparison in which Oklahoma’s casino fees stand out.

In other states, tax rates on non-tribal casinos routinely run between 20 and 40 percent. Some will object that it’s not fair to compare tribal casinos with non-tribal operations. But even when examining only tribal casinos, it’s clear that Oklahoma’s casinos are paying a pretty low rate. Elsewhere, tribal casinos may pay fees of around 20 percent, and it’s estimated 44 percent of tribal gaming compacts nationwide include fees of 10 percent or greater.

Oklahoma’s gaming compacts, which expire at the end of this year, provide tribes with significant advantages—including virtual exclusivity or monopoly of casino revenue and operation, casino revenue-base subject to fees, and other provisions.

Put simply, tribal entities are given a near-monopoly on Las Vegas-style gambling in Oklahoma, and that has reaped them enormous financial gain. Oklahoma is now home to more than 100 casinos, a larger number than every state but Nevada and California, and billions go through those casinos. Casino gambling, as a share of Oklahoma’s GDP, has doubled since 2004, even after adjusting for inflation. Also, an unbiased analysis of the economic impact of gambling reveals that, especially in Oklahoma, gambling is first an extremely redistributive endeavor wherein billions of dollars are extracted from the normal economy.

As money pours through those casinos, the provisions limiting competition make those businesses roughly comparable to a utility with a monopoly, which puts the state in the business of determining fair prices.

Those opposed to changing gaming compacts argue the compacts continue in perpetuity unless both sides agree. That’s an interesting take since renegotiation isn’t likely to happen if a deal turns out to be lopsided in favor of one entity, and the state constitution and numerous laws restrict the ability of policymakers to forever bind future citizens.

Governor Stitt thinks it is time for the state to reassess whether the fees paid by casinos to Oklahoma government, which are supposed to go to education, are fair. As Oklahomans learn more about this issue, I think most people will agree with him.

Jonathan Small serves as president of the Oklahoma Council of Public Affairs.