KATRINA STILL RAGES METAPHORICALLY, and this time she’s battering Capitol Hill in the form of budget struggles over everything from entitlement programs to casinos. Members of Congress, aided by lobbyists, are duking it out over what to cut and how to spend, in the face of already bloated federal spending and the needs of hurricane victims. One sticking point: the Bush administration’s plan to offer unprecedented tax breaks to Mississippi’s 13 profitable off-shore casinos.
The tax breaks are part of Bush’s proposed Gulf Opportunity Zone, which would create tax incentives, grants, and regulatory relief for working-class homeowners and small businesses. But the decision to include Mississippi’s damaged casinos in the “GO Zone” boils the blood of anti-gambling activists. Traditionally, federal tax incentive plans have excluded casinos, along with tanning salons, massage parlors, and country clubs. Besides, say House conservatives, there is no need to offer enticements to an industry that is already rebuilding under its own steam and that didn’t originally ask for help, although it’s having second thoughts.
The industry lobby, the American Gaming Association, wants its share of aid. The association correctly reports that the state of Mississippi “loses $500,000 in revenue each day the Gulf Coast casinos are not operational.” Both gaming proponents and those state lawmakers who only grudgingly tolerate casinos agree that casino tax revenue is important for state and local coffers. Mississippi banked $334 million last year from its 12 percent tax on gambling, so it’s hurting now. In September, after Katrina, the state gleaned $16 million from casinos, down from nearly $25 million in the same month in 2004. September’s casino tax take, the lowest since February 1996, came entirely from the state’s Mississippi riverboat casinos not devastated by the hurricane.
So should Congress extend federal tax incentives to help revive this source of revenue? Mississippi governor Haley Barbour supports the Bush administration’s plan. It would offer casinos a 50 percent deduction for investment in infrastructure and equipment. The casinos reportedly want more: Lately, some have asked for tax breaks for the wages they have been extending to employees since their operations were destroyed.
But Mississippi’s gambling taxes are already the third lowest in the nation. What’s more, national gambling firms are wealthy enough to make large donations to Katrina relief. MGM Mirage, for example, the corporate parent of Biloxi’s Beau Rivage casino, pledged $1 million plus unlimited employee matching. Do such companies really need federal incentives to rebuild?
Most of the Mississippi casinos are run by nationwide firms with considerable capital. Leading companies such as Harrah’s even see Katrina as an opportunity. Since the hurricane, Mississippi has adopted a friendlier siting policy, allowing casinos, which previously were kept offshore, to be built on land, within 800 feet of the water. As a result, some operators are planning to build more elaborate hotel and gambling complexes, which likely will produce bigger profits than before. They will also boost the stricken economies of Biloxi and Gulfport by providing even more than the 17,000 casino jobs available before Katrina. But the parent companies of the damaged casinos planned to do all this before talk of tax incentives began. Already, three of the Biloxi/Gulfport casinos plan to reopen by January 1, although others won’t reopen for months, and the state gaming commission will soon consider a proposal for a new casino in Biloxi.
To critics, it seems obvious that casinos ought to be a source of money for rebuilding, rather than beneficiaries of relief. Moreover, while they’re not contributing tax revenue to local coffers, what do casinos offer but vice, crime, and misery for the families of those ensnared by the bright lights of the slot machines? Rep. Frank Wolf, a Virginia Republican and longtime gambling opponent, is incredulous at the Bush proposal: “We’re having to cut programs, but we’re going to be giving the gambling industry subsidies to rebuild when they all have insurance? They’re all going to rebuild anyway!”
On October 12, Wolf and 64 other members of Congress signed a letter to President Bush asking him to reconsider tax breaks for the gambling industry. So far, however, the administration plans to forge ahead with its plan, assuming Congress passes it.
While some casino owners admit they need no incentives to rebuild, the American Gaming Association insists its members should be treated just like any other business. AGA president Frank J. Fahrenkopf Jr. argues in a statement responding to Wolf’s campaign that tax breaks will speed the return to work of casino employees, aiding not just those workers but also businesses that rely on gamblers’ patronage (though a number of small local bars say their business has increased dramatically now that the casinos are temporarily shuttered).
Something else that rankles Wolf: The inclusion of the casinos in the Gulf Opportunity Zone proposal nearly went unnoticed in Congress. “With the lobbyists here in town, it’s 12:30 at night, the vote is taken, and all of a sudden you wake up, and three days later you read the bill and find out that the gambling industry has been subsidized,” he complains. If a hurricane-prone state wants to permit gambling but force it offshore, as Mississippi did, that’s its business; but why should Washington award tax breaks to casinos shipwrecked during the inevitable summer storms?
Joseph Lindsley is an editorial assistant at The Weekly Standard.
