Will Baltimore Bet on Gambling to Solve Property Tax Problems?

January 23, 2008

Baltimore might be the next jurisdiction to fall prey to the idea of state-run gambling as a budget panacea. A mayoral task force has reported that slot machines, if voters approve them in November, and full-fledged casinos may be a good way to reduce property taxes in the city. From the Baltimore Sun:

Relying on gambling revenue to reduce property taxes underscores how difficult a task the city might have as it attempts to cut a stubborn property tax rate that officials believe has stifled growth by sending residents and businesses to the suburbs.

For the short term, the panel presented nine recommendations—including raising the income tax, lifting a cap on assessments and collecting more revenue through better commercial assessments—to lower the rate by about 11 percent. For the long run, it proposed a local sales tax.

Baltimore ‘s tax rate is $2.268 per $100 of assessed value.

Applying a model used in Detroit, which has casinos, the committee estimated Baltimore could reap $45.9 million through casino gambling. With only slots, the report estimates the city could collect $32.8 million a year.

. . .

Sen. George W. Della Jr., a Baltimore Democrat whose district would include the proposed slots parlor, tried to amend the legislation to guarantee that gambling revenue would be used for property tax reduction, but his proposal was defeated. Della said the Dixon administration said that would “tie their hands.”

Sen. Lisa A. Gladden, a Democrat whose district includes Pimlico, said it would be “practical” for the city to use slots revenue to reduce the property tax. Gladden, a longtime slots proponent, said that other cities have expanded gambling in order to help balance municipal budgets and that it’s time Baltimore wised up.

“The reality is you want to attract homeowners to a community like Baltimore City, and you can’t when the property taxes are so high, [public] services are moderate and crime is high,” Gladden said. “You need a crazy infusion of cash, and you get that by putting a slots venue on the I-95 corridor.”

Maryland’s lottery already brought half a billion dollars into state coffers in FY2006, but apparently that’s not enough gambling revenue for some policymakers.

Those promoting casinos (as well as slots and lottery supporters) might want to stop and think about where the new gambling revenue will come from. The idea is to lower property taxes, but surely many lottery players and potential casino patrons own property? So they will lose their money in one of Maryland’s gambling enterprises and eventually they will, in theory at least, recoup some of it (after lottery or casino employees and bureaucrats take their cut) in the form of lower property taxes. Wouldn’t it make more sense for them to keep their money in their wallets in the first place?

Of course, not all lottery and casino customers own property. So what this would amount to is a transfer of money from gamblers to property owners. Some people may think property owners are, in general, more deserving than gamblers, but should the tax code really be used to make these sorts of moral judgments? It’s bad enough that the tax code already considers smokers as a group less deserving than otter taxpayers.

If Baltimore’s property taxes are exorbitant, that needs to be dealt with, but casinos are not the answer, especially if they are run by the government. Profits from government-run casinos would be nothing more than implicit tax revenue, although policymakers would certainly refuse to label them as tax revenue, just as they do with lotteries. Allowing privately run casinos and subjecting them to sales taxes would be better tax policy than having the city run them, but either way, it’s not going to solve the city’s property tax problem.

Click here for more on lottery and gambling taxes.


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