Gamblers lose $6 for every $1 Florida gets, Rep. Van Zant says

While the Senate signaled its gambling bills were all but dead this year, they’ve stayed on life support in the House. But one lawmaker wanted his fellow representatives to remember gaming revenues come at a high price.

Rep. Charles Van Zant, R-Keystone Heights, said lawmakers should remember that all gaming revenue is money someone has lost.

"Every time you lose a dollar at gaming, there's six more dollars that are lost," Van Zant said during a Feb. 29, 2016, meeting of the House Finance and Tax Committee. "For every time the state gets paid a dollar in taxes, somebody loses $6, is another way of saying that."

Van Zant was speaking against HB 7109, a wide-ranging gaming bill that in part allowed for the ratification of the contentious gaming compact the Seminole Tribe of Florida negotiated with Gov. Rick Scott in 2015. The bill also included all sorts of provisions for pari-mutuels, licenses and permits, care of racing greyhounds, and more.

While the measure passed and was reported favorably to the House, the Senate postponed its own gambling bills March 1. Barring some extraordinary procedural move, the Senate measure is likely tabled for the rest of the session, which ends March 11. That means the new compact likely won’t be ratified.

Van Zant opposes gambling in general, so his point of view is that any gambling revenue, whether for the state or a casino or track, is all money taken from people who have placed a bet of some form.

We’re not going to focus on his moral objections, but we were curious whether people lose six times what the state gets in taxes from gaming. It turns out that it depends on what kind of gambling you’re talking about.

Gambling revenues

Van Zant was not specific in the hearing about what form of gambling he meant, but his office referred us to a 2005 report in the National Tax Journal about state and local government taxes on casinos nationwide.

"The American Gaming Association (2004) reports that 443 commercial casinos in 11 states generated more than $27 billion in gross gaming revenue in 2003," the report read. "State and local governments derived $4.32 billion in direct gaming taxes from this economic activity, or about 16 percent of gross gaming revenue."

That 16 percent rounds to $1 of state revenue for every $6 gamblers spend, Van Zant’s office said.

Those numbers are more than a decade old, so we looked up a more current snapshot. The American Gaming Association in 2014 said casino gaming revenues (from gambling, not hotel rooms or drinks or some such) were $67 billion, and casinos paid out $10 billion in state and local taxes. So more recently, the nationwide figure rounds up to almost 7 to 1.

But applying that logic to Florida’s gambling environment is difficult, at best.

It would have helped if Van Zant had been more specific, because Florida has several forms of gambling. There are cardrooms, where people play poker and other games; pari-mutuels, which are essentially horse and dog racing; slot machines; lotteries; and Indian-owned casinos.

The state gets a cut of all these forms of gambling, but the percentage varies depending on the game. For example, cardrooms are taxed at 10 percent. The slot machine tax rate, meanwhile, is 35 percent. There are various fees and permits and other charges involved, too.

"I think the national statistic stands on its own merit, but it is problematic to apply it to Florida’s specific tax and revenue-sharing structure related to legal gambling," state economist Amy Baker from the Florida Office of Economic and Demographic Research told us. "The gaming taxes are all on different bases and aren’t designed to be functionally equivalent."

She added the state hadn’t done a comprehensive revenue analysis across all forms of gambling combined, but it wouldn’t be a fast or simple calculation.

To even try to make a direct comparison to Van Zant’s stat, we could look at only casino revenue. Seven of Florida’s eight casinos — which share revenue with the state — are owned by the Seminole Tribe.

The state’s cut of casino revenue is spelled out in the Tribe’s compact, a business agreement that sovereign Indian tribes must enter into with their home states in order to run casinos on their land. (This is the agreement the Tribe wants the Legislature to renew with some new provisions.)

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The state is technically not allowed to tax the Tribe, because that’s against federal law. But the compact allows the state to agree with the Tribe to get money via "revenue sharing."

Under terms of the compact that expired last year, the Seminoles agreed to share gaming revenues with the state based on tiers: The Tribe would pay 12 percent of net revenue up to $2 billion, 15 percent of revenue between $2 billion and $3 billion, and so on.

Some of that revenue was guaranteed, while the rest depends on how well the casinos did in a given year.

Calculating net revenue can get pretty complicated, but the shorthand version is that the state said the effective cut those casinos gave the state was 12.24 percent in 2015. That ratio comes out to about 8 to 1 — in effect, people gamble away $8 for every $1 the state gets, using Van Zant’s reasoning.

That’s more than the 6 to 1 ratio he cited, but again, that’s just casino dollars. As we’ve noted, other forms of gambling bring in more taxes per dollar, some less.

We also should point out that the vast majority of this money is what economists refer to as "cannibalized." That is, it’s money coming from people already in the state who gamble instead of spending that money elsewhere.

Our ruling

Van Zant said, "For every time the state gets paid a dollar in taxes, somebody loses $6."

His argument is that the taxes states receive from gaming revenue is money other people have lost while gambling. Van Zant was using nationwide figures from 2005 for the amount of tax money state and local governments received from casinos. That ratio changed to about 7 to 1 by 2014.

But that comparison is tough to apply to Florida. The state has more forms of gambling than just casinos, and the state gets money from all of them in different ways and at different rates. If we look at just the terms of how the Seminole Tribe shares its casino revenue, the state gets about $1 for every $8 people spend in casinos.

Van Zant’s larger point stands that state tax revenue comes at the expense of comparatively high gambling losses, but the details are fuzzy at best. We rate his statement Half True.