Pritzker signs bill lowering taxes on a Chicago casino
Gov. J.B. Pritzker and Illinois lawmakers agree that when taxes are too high, not even a casino in the heart of Chicago can make money.
Illinois initially loaded up so many taxes that it was not feasible to build and operate a Chicago casino, so Gov. J.B. Pritzker signed a new bill June 30 to cut those taxes.
It also marks state leaders’ acknowledgment that over-taxation can halt private investment in a venture. That comes as Pritzker is pushing his “fair tax” on the Nov. 3 ballot, which would cost more than 100,000 small businesses up to 47% more in taxes as they deal with COVID-19’s economic fallout.
In 2019, Pritzker signed a bill legalizing significantly more gaming in Illinois, with plans to build multiple casinos, bump up taxes and bets on video gaming and start sports betting. It imposed a 72% effective tax rate on a Chicago casino – the highest gaming tax in the nation and one which an independent analysis determined would make it impossible for any operator to make money.
The new law lowers the tax structure so the state will take about $350 million less from the Chicago casino, but still collect about $500 million annually.
Chicago Mayor Lori Lightfoot was more optimistic, saying the casino could bring in $1.2 billion in annual taxes. The city and state will unevenly split the revenue, with the state getting a slightly larger share.
The state revenue will go toward building construction and upgrades. Chicago’s will help pay down the city’s broken police and fire pensions, with some money also going toward criminal justice at the county level.
“This momentous legislation tackles key priorities for the state of Illinois – helping to ensure that Chicago can pay for first responders’ pensions and alleviate the burden on property taxpayers, along with investing in universities and hospitals throughout the state,” Pritzker said in a statement.
The construction of a Chicago mega-casino is expected to be an economic driver, bringing jobs and tourists to the city in addition to tax revenue. It will also be privately owned, eliminating some of the corruption fears had the city been the owner.
It’s not yet clear where the casino will be located. Five sites were proposed outside of downtown on the West and South Sides with the goal being to bring economic growth to these areas. Last summer, a state consultant cited the tax structure as a reason none of the locations would be good for business. Now that the tax issue is fixed, some city aldermen are opposed to a big casino in their wards.
Illinois and Chicago are both facing big pension demands, but a casino will do little to solve Chicago’s deep pension debt and the state is using the money for new spending. Even if voters give Pritzker the ability to raise $3.7 billion more through a progressive tax, it will do little to fix a pension debt pegged at as much as $241 billion.
Besides, as the Chicago casino showed, trying to squeeze out too much tax revenue kills business prospects. If Illinois wants to minimize the COVID-19 economic damage, most economists agree a recovery is the wrong time for new taxes, and common sense says you don’t add taxes to the small businesses that create most Illinois jobs and suffered the most during the pandemic.
The better bet to fix pensions is amending the Illinois Constitution to protect pensioners’ already-earned benefits and allow for slower growth in future benefit accruals. That would protect public employees’ retirements as well as taxpayers’ wallets and businesses’ futures.