Even before Colorado’s mountain casinos can claim a drop in business because of the pending smoking ban, gaming regulators are considering lowering taxes on the industry next year, which would be the first change in the gambling tax structure in nearly a decade.
The Colorado Limited Gaming Control Commission is studying whether a lower tax rate would help small and medium-sized casinos that are struggling to compete against larger casinos, commission Chairman Jim Alderden said Monday.
The industry, however, indicated last week it may seek a broader tax cut next year.
Casinos are taxed on a graduated scale – casinos with higher revenue pay a higher tax rate – to encourage a mix of casinos and promote local investment.
“We’re trying to figure out why (a lower tier) appears to be struggling or maybe not as financially profitable as the others,” Alderden said. “We need to look and see, is the tax rate contributing to that?”
A small casino in Central City folded last year, and a small casino in Black Hawk was recently bought and shut down by gaming giant Ameristar Casinos, which operates one of the largest casinos in the state.
Under the current tax structure, the first $2 million a casino generates is taxed at 0.25 percent; $2 million to $4 million is taxed at 2 percent; $4 million to $5 million is taxed at 4 percent; $5 million to $10 million is taxed at 11 percent; $10 million to $15 million is taxed at 16 percent; and $15 million and above is taxed at 20 percent.
That structure will remain in place for fiscal 2008, which starts July 1.
More than half of the state’s 44 casinos generate $10 million or less in annual revenue.
The commission will look at perhaps broadening the $4 million-to-$5 million bracket or lowering the tax rate on the $5 million-to-$10 million bracket, said Colorado Division of Gaming spokesman Don Burmania.
Though such changes would be aimed at helping small and medium-sized casinos, they would provide tax relief for all casinos that generate more than $5 million in annual revenue.
The industry told the commission last week that it may seek an even broader tax cut because casinos are seeing declining profits across the board.
After years of breakneck growth in the 1990s, the industry’s revenues have tapered to about 4 percent growth in recent years.
“There were different factors that we presented as to why the commission should at least look at the issue,” said Lois Rice, executive director of the Colorado Gaming Association, which represents about two dozen of the state’s 44 casinos.
As one example, Rice noted that insurance costs have risen by almost 30 percent.
In fiscal 2006, the casinos generated adjusted gross proceeds – total bets minus payouts – of $782 million. The state collected $108 million in gaming taxes. The taxes go toward historic preservation, the state’s general fund and the local jurisdictions where gaming is legal – Black Hawk, Central City and Cripple Creek.
The last time the gaming tax structure was changed was in 1999. The change that is under consideration doesn’t take into account any potential impact from the smoking ban, which would go into effect Jan. 1, if signed by Gov. Bill Ritter, who has until June 4 to do so.
“Nobody knows the effect of the smoking ban yet, so they didn’t want to make a change until we really know what that effect is,” Burmania said.
Staff writer Andy Vuong can be reached at 303-954-1209 or avuong@denverpost.com.
Casino tax rate
0.25% Tax paid on the first $2 million
2% Tax on the next $2 million
4% Tax on the next $1 million
11% Tax on the next $5 million
16% Tax on the next $5 million
20% Tax on $15 million and above
