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Detroit Casinos May Fail Due to Tax Burden

TRAVERSE CITY, Mich. -- A new study questions whether gaming developers would be willing to invest the large amount of capital it takes to build a world class casino in Detroit. According to the study presented to the State Senate Committee on Gambling, the three proposed casinos for Detroit would be the highest taxed casinos in the country if the legislature adopts the Michigan Gaming Control Board's plan to change Proposal E and raise the tax rate.

The study conducted by Michigan Consultants, compared the effective tax rates on casinos on Michigan Indian Reservations, Atlantic City, Las Vegas, Windsor and the proposed tax rates on the Detroit casinos. The figures are based on a generic $300 million casino and include the Single Business Tax and property tax rates. They do not include Federal and local income taxes.

"The proposed tax increases by the Michigan Gaming Control Board will burden the Detroit casinos with an enormous tax disadvantage compared to competitors in other areas," concluded Jake Miklojcik, President of Michigan Consultants. "If competitors use their tax advantage to offer better odds and better service, Detroit may never realize the expected jobs and economic opportunities the people of Michigan voted for."

The study showed the Michigan Gaming Control Board's proposed tax increase of $1,500 per slot machine and the unlimited cost of the state bureaucracy to regulate the casinos would add at least $25,000,000 per year in taxes to the three Detroit casinos.

Under Proposal E, the Detroit casinos would pay an 18% tax on the annual gross revenues to be split between the State (45%) and the City of Detroit (55%) and a 1.25% Municipal Service Fee to Detroit. The study estimates the voter approved taxes would generate over $190,000,000 per year in direct casino taxes.

"If the legislators want the Detroit casinos to succeed, they should consider lowering the tax burden rather than increasing it," said Miklojcik. "It is no coincidence that the venues with the lowest tax burdens (Atlantic City, Las Vegas and Michigan Native American casinos) are thriving today. Michigan has lowered the tax burden on businesses for the past seven years. I don't see why the casino business shouldn't be treated differently."

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