If slots pay off big time, cut state in on the action

The people poised to get rich from Broward County's slot machines say they don't know how they'll get by if the Legislature taxes them at more than 30 percent. That's funny. So funny that it inspired Florida TaxWatch, as fiscally sober an outfit as you're likely to find, to use a little humor of its own.

On Page 9 of its report urging a 74 percent tax rate on slots, TaxWatch includes a table showing the rate at which states tax casinos and the number of casinos in each state that have gone bankrupt. In Louisiana, with just a 36 percent tax rate, zero casinos have gone under. But in New York, which at 80 percent imposes the highest tax, the number of bankruptcies is -- zero. It's dry humor that throws a wet blanket on the gambling industry's poor-mouthing. A footnote adds that Canada taxes casinos up to 90 percent, also with zero bankruptcies.

The Legislature is trying to write the rules for four "racinos" authorized by last year's constitutional amendment and this year's favorable Broward referendum. The Senate proposes the 30 percent rate. The House wants 55 percent. The title of TaxWatch's report indicates what's at stake: The State Legislature May Leave $4.5 Billion on the Table by Not Setting a Fair State Gaming Tax. That issue is simple. Gambling revenue can go into the state treasury to benefit education -- which supporters of slot machines said was the priority -- or it can go into the pockets of gambling companies.

Other issues aren't so simple, such as whether to allow Class II or Class III slots, and what to do about Indian casinos. The "racinos" -- so named because the amendment allows slot machines at three race tracks and one jai-alai fronton -- want the Las Vegas-style Class III slots, which have higher stakes because players bet against the house. Class II slots, in use already at Indian casinos, essentially are a form of bingo that pools only the money being wagered at that moment.

Gambling opponents want the Legislature to stick with Class II machines. But because of the way federal law works and the way Florida's amendment is written, Indian casinos say they now have the right to Class III machines no matter what lawmakers allow in Broward. The upside, if there is one, is that Indian casinos -- which don't owe taxes on Class II machines -- would by law have to negotiate terms for Class III slots.

For the Broward racinos and Indian casinos, Florida should get the highest tax rate possible. The state also should charge much more than the proposed maximum license fee of $2.5 million. The TaxWatch study notes that Pennsylvania charged $100 million per license -- and the buyers resold them for about $460 million.

People should have to go to a casino to lose money. Unless Tallahassee does the right thing, everybody in Florida will lose to casinos.