EDITOR’S NOTE: This column was written prior to the impacts of the coronavirus being felt in the U.S.
In 1977, Jimmy Carter became the 39th president of the United States, the median U.S. household income was less than $14,000, and Atlantic City was poised to become the country’s second major destination for legal casino gaming.
Fast-forward 43 years. We’re in the midst of the 45th presidential administration, the average U.S. household takes in nearly $64,000 annually and legal gaming exists in some form in 43 states.
While America and its casino industry have changed significantly over four decades, one aspect of gaming has not. Casinos are still required to take slot machines out of commission to process tax information whenever a customer hits a jackpot of $1,200 or more.
Today—just as in 1977—when a customer reaches that payout, the machine is put out of service while casino staff manually process the tax-reporting paperwork. The already-underfunded and understaffed Internal Revenue Service is then inundated with slot jackpot reports, receiving millions of W-2G Forms per year.
If adjusted for inflation, a $1,200 slot jackpot is equivalent to around $4,700 in today’s dollars. By not accounting for inflation, the number of reportable jackpots continues to multiply, disrupting casino operations and our customers’ experience.
That’s why the American Gaming Association, our member companies and the industry’s legislative champions in Congress have strongly advocated for the U.S. Department of the Treasury to modernize the threshold by increasing it to $5,000.
Congress and the administration enacted tax reform legislation in 2017 with the goal of modernizing and simplifying our tax code. Raising the slot threshold is consistent with those objectives. It would also alleviate unnecessary burdens for the industry and our patrons, while allowing the IRS to focus more of its limited resources on net slot winnings.
As we mark Tax Day this month and work to modernize our industry’s tax reporting standards, it’s important to also recognize the key role gaming plays as a tax contributor in more than 40 states across the country. Each year, the gaming industry generates $40.79 billion in taxes to local, state and federal governments for infrastructure, education and other crucial investments.
We are also the rare exception in an era of jurisdictional bidding wars that feature expensive incentives and tax breaks to attract businesses. When gaming enters a new market, whether with a new property or a new offering like legalized sports betting, the industry does so without subsidies, and pays significant taxes for the privilege. We’re simply adding to the bottom line.
The gaming industry should not remain beholden to outdated, inefficient regulations, particularly when it comes to taxes. Looking forward, we will continue our mission to modernize antiquated rules like the slot tax threshold, which hurt the customer experience and impose needless costs on casinos and regulators alike.