Reopened Atlantic City Casinos Could Benefit from Tax, Sports Betting Relief Bills
Posted on: September 16, 2020, 08:13h.
Last updated on: September 17, 2020, 09:14h.
Atlantic City’s nine gaming properties, struggling with the economic impact from COVID-19, may get sought-after financial assistance. The source of the hope is two bills The New Jersey Assembly’s Appropriations Committee plans to review on Thursday.
One bill, A4002/S2257, provides casinos a tax credit on sports betting revenue. The other bill, A4032/S2400, reduces casino taxes and fees.
The tax and fee reduction bill will lower the 8.5 percent tax on casino revenues and the 13 percent tax on online wagering. Its primary Senate cosponsors are Senate President Stephen Sweeney (D-West Deptford) and Chris Brown (R-Ventnor City).
It is estimated the legislation will save $93 million for just one year, the Press of Atlantic City reported. The legislation will also reduce the 1.25 percent tax for the Casino Reinvestment Development Authority, as well as various fees.
The tax break bill additionally provides $100 million of federal coronavirus relief funds to the New Jersey Economic Development Authority. It will go to small business assistance. An amended version of the bill was approved by the Senate in July.
The federal funds appropriated by S-2400 (2R) for small business assistance have already been awarded to New Jersey. The bill appropriates them to the New Jersey Economic Development Authority for small business assistance. The funds are a portion of the federal assistance awarded to New Jersey through the Coronavirus Relief Fund established by the CARES Act.
Far Too Little, Economist Says
“The [legislative] action is welcomed. But it is far too little,” Michael Busler, a finance professor and economist at New Jersey’s Stockton University, told Casino.org.
Since Atlantic County has experienced less than 4,000 COVID cases and less than 250 fatalities, the casinos should have been able to open in mid-May and reach full capacity by July 1,” Busler told Casino.org. “Since that didn’t happen, casino cash flows will suffer tremendously, likely seeing this year’s total revenue down about 30 to 50 percent below last year.”
The casinos were forced to close on March 16 on New Jersey Gov. Phil Murphy’s (D) order. They were allowed to reopen at 25 percent capacity on July 2.
The shuttering led to lost revenue. Atlantic City’s casinos saw a $112 million gross operating loss in the second quarter. Gross operating profits for the nine casinos plummeted 170 percent April through June. Gross gaming revenue (GGR) dropped $767 million through June 2020, compared with the same first six months of 2019.
The proposed tax break will “simply reduce the size of those large losses,” Busler explained. “The tax reductions should be larger and should probably last more than one year.”
Sports Betting Credit
The sports betting bill gives casino operators — as well as racetracks that offer sports wagering — a credit on free bets and promotional wagers offered to bettors, the Press added.
The credit kicks in after the first $8 million from in-person bets and after the first $12 million from internet wagers. Higher amounts will not be taxed, the Press said, under the Senate bill cosponsored primarily by state Sens. Vin Gopal (D-Long Branch), and Paul A. Sarlo (D-Wood-Ridge).
Busler said Atlantic City casinos don’t necessarily “need” a tax credit on sports betting because that revenue has been increasing.
Last month, the state’s casinos and race tracks received $326.3 million from gamblers. After paying out winning wagers, the gaming properties and race tracks saw $39.5 million in revenue on sports bets in August, the Associated Press reported.
The proposed tax credit on sports wagering “will add to the casino’s bottom line and help to offset losses from table games and slots because of the capacity constraints,” Busler explained. “Table games and slots usually account for the vast majority of revenue.”
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