In his recently proposed budget, Iowa Governor Terry Branstad (l.) recommended a double-digit tax increase on casinos, from 22 percent to 36 percent. The casino tax hike would raise 0 million that would reduce corporate taxes by half, said Branstad aides.
Branstad said the 36 percent tax rate was part of a deal he made allowing land-based casinos, when he previously was governor. After he left office, the deal was challenged in the courts and the challenge was upheld by the Iowa Supreme Court, based on different tax rates for riverboat and land-based casinos. Branstad said casino lobbyists successfully convinced legislators to apply the lower tax rate to all Iowa casinos.
Currently, 15 of Iowa’s casinos pay a state tax of 22 percent on adjusted gross receipts from gaming; the two racetrack casinos, in Altoona and Council Bluffs, pay 24 percent.
Several gaming industry representatives said the tax increase would have devastating effects. Wes Ehrecke, president and chief executive officer of the Iowa Gaming Association, said the tax increase would penalize an industry that contributes roughly $1 billion to the Iowa economy, employs about 10,000 people and gives about $50 million in charitable donations annually.
Ehrecke said casino taxes are paid on adjusted gross revenue, not net revenue like corporations. “The (tax increase) would mean a 63 percent increase for casinos. If you’re going to help a business thrive versus just survive, you don’t increase its taxes,” he said. “We pay taxes before lights, labor or anything else. It’s already a significant amount of taxes.”
Branstad said he expects Republican legislators to support the casino tax increase. However, GOP House Speaker Kraig Paulsen said, “I can tell you House Republicans did not campaign to raise taxes, but we’ve got to work our way through it.”