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State

Video gambling industry: Don’t raise taxes; raise the bets

House committee hears alternative plan for increasing gambling revenues

Ivan Hernandez, executive director of the Illinois Gaming Machine Operators Association, testifies Thursday before the House Executive Committee at the Capitol in Springfield. Hernandez said freeing restrictions on video gambling machines would bring in more tax revenue than raising taxes on the machines.
Ivan Hernandez, executive director of the Illinois Gaming Machine Operators Association, testifies Thursday before the House Executive Committee at the Capitol in Springfield. Hernandez said freeing restrictions on video gambling machines would bring in more tax revenue than raising taxes on the machines.

If the state of Illinois wants more revenue from video gaming, one gaming industry executive said Thursday, lawmakers should loosen betting restrictions rather than raise video gambling tax rates.

Ivan Hernandez, who heads the Illinois Gaming Machine Operators Association, offered that proposal to the state House Executive Committee, which is considering several alternatives for increasing state revenue from video gambling.

“Our proposal is projected to far exceed (Gov. J.B. Pritzker’s) request, without resorting to a tax increase,” Hernandez said.

The Executive Committee, chaired by Democratic Rep. Chris Welch of Hillside, heard testimony Thursday from representatives of the video gambling industry who unanimously oppose a proposed tax hike that Gov. Pritzker outlined in his late-February budget address. No legislation has been introduced so far.

Video gambling machines are taxed at 30 percent, with the remaining money split 50-50 between the machine operator and the establishment housing the machines. Pritzker’s plan would increase that state’s tax rate to 50 percent, resulting in more than $100 million in new revenue for state and local governments.

Opponents have framed their argument around the local establishments – mom-and-pop restaurants, bars, VFW posts and more – that they say rely on the machines for increased foot traffic and, ultimately, successful business.

Elements of Hernandez’s proposal include raising the bet limit on single plays from $2 to $4, increasing the maximum winnings on a single play from $500 to $1,199, allowing games with higher jackpots, and increasing the number of gambling terminals allowed at one location from five to six.

Those measures, Hernandez said, would create $210 million in new tax revenue the first two years, without changing the tax rates.

Policy objectives were not so clear cut for the other topic of the hearing, which focused on the largely unregulated market of “sweepstakes” machines that the Illinois Gaming Board, along with many state and federal courts, have maintained are illegal.

Sweepstakes are in many ways similar to video gambling machines, but do not fall under the same state oversight, nor are taxes on them paid to state and local governments, according to a WBEZ investigation last year.

Because they face no other regulation than to be registered with the Illinois Department of Revenue, the machines can be found in places where video gambling terminals have been banned, WBEZ reported.

Cory Aronovitz, a lawyer with the Chicago-based Casino Law Group, told lawmakers unfamiliar with the matter that the machines are kiosks for “product promotion,” meaning a person pays cash to the machine, receives, for example, a coupon for a discount on items on a website, then gets the chance to win cash by playing a slots-like game.

Rep. Keith Wheeler (R-Oswego), argued sweepstakes machines should be placed under the same regulatory laws as video gambling terminals. He said any regulatory changes addressing sweepstakes machines would be packaged in a gambling overhaul bill that has yet to appear in the Legislature.

On top of considering how to legalize sports betting and whether to allow more casinos in Illinois, state lawmakers are also considering changes to policy affecting the video gambling terminals that appear in almost 7,000 local establishments across the state.

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