La Center City Council approved a temporary tax overhaul on Wednesday last week, slashing taxes for the city’s two cardrooms. The members of the City Council unanimously supported the idea in an effort to help the cardrooms stay afloat and be competitive. The recent vote is the final decision of several meetings, discussing a possible tax relief for the cardrooms. Under the new tax regime, the tax rate imposed on the cardrooms will be based on their monthly gross revenues.
The top factor that determines the profitability of an industry is undoubtedly the tax rates. Quite unsurprisingly, the gambling operators tend to avoid tax-heavy jurisdictions as no business is willing to be burdened with too high taxes. Apart from that, the high charges usually affect the prosperity of a market and its competitiveness. To maximize gaming’s economic contributions, jurisdictions should keep tax rates low.
As a matter of fact, high rates of gambling tax increase the short-term government benefits, while lower-tax jurisdictions enjoy long-term gains for the governments. According to the latest news, La Center is the latest city that lowered its taxes in order to save the operations of the two cardrooms, which were already on their last legs. Over the past several months, the two cardrooms experienced a steep decline due to competition from the nearby casino establishments.
More Details about the Temporary New Tax Regime
The idea for the tax relief swirls in the air since October last year, when the owners of the two cardrooms asked La Center Council for a temporary tax reduction. Industry experts claim that the Council’s decision is the right one, as the high taxes would kill the two cardrooms and the city would lose a steady source of revenues. The new tax regime includes a tax rates scale from 5% to 15%. The rate which the owners of the cardrooms should pay will be based on monthly gross revenues.
The cardrooms will be imposed a 5% tax on revenues up to $400,000. For revenues between $400,001 up to $700,000, the tax rate would be 7.5%. For revenues between $700,001 to $1 million, the tax rate will be 10%. If the monthly revenue is estimated to be between $1 million and $1.3 million, the cardrooms owners will have to pay a 12.5% tax. All revenues above $1.3 million will be imposed a tax rate of 15%. Under the previous tax regime, the cardrooms needed to pay a 10% flat rate.
The City Council also agreed to lower late fees and allowed the city to take out a lien on unpaid gambling taxes. The late fees have been reduced from 5 percent to 2.5 percent for 1 to 10 days, 10 percent to 2.5 percent for 11 to 14 days, 10 percent to 5 percent for 15 to 20 days, 15 percent to 5 percent for 21 to 31 days and 20 percent to 10 percent for over 31 days.
Another provision states that the cardrooms will be fined, supposing that either of the cardrooms decides to stop operating this year. The tax reform is to expire at the end of the year, unless the council does not enter into a new agreement.