An interesting phenomenon occurred in the Hoosier State recently



Indeed, the comment was part of an argument that attempted to show just the opposite, that racinos in the middle of the state - targeting the relatively population-rich Indianapolis region - had the advantage, despite a higher tax and fee rate.

Many of the legislators took the comment as fighting words. The last time Indiana saw such a call to arms, Lincoln was in the White House, and the call was for troops to help quell a rebellion.

Hoosiers know what a tax is. As one legislator put it, “If it walks like a duck, and talks like a duck, it’s a duck.” The point was that payments to subsidize racing interests come off the top line and are paid before other expenses. They have the same effect as a tax on gross revenues. They waddle like a tax and quack like a tax. And for racinos they are as painful as a tax.

This, of course, was hardly the first time that lawmakers in a gaming state have piled on a casino executive. This time, though, something was different. Lawmakers were the ones questioning the level of taxation on a segment of the gaming industry.

Indiana is looking at such issues because it faces the potential for significant competition soon from Ohio and Kentucky, as well as expanded gaming in Illinois and Michigan. That prospect is helping policymakers to focus on what needs to be done to protect their industry.

Indiana stands out in this instance because, typically, public officials - in virtually every state - simply “don’t get it” when it comes to understanding the tax burden on its licensees. Pennsylvania, for instance, continues to list its tax rate as 55 percent. Fact is, there is an additional 1.5 percent regulatory fee for all casinos and a local-impact fee that for some properties pushes the effective tax rate to above 60 percent. Illinois notoriously raised its graduated gaming tax rate to 70 percent, only to retreat back to 50 percent after - surprise! - the industry’s predictions of lost jobs and canceled capital investment proved true. Some legislators in Nevada and New Jersey question why their states are imposing single-digit tax rates when others are collecting three to eight times as much, while failing to recognize that high taxes and high-cost, high-employment resorts are mutually exclusive.

Massachusetts, to its credit, is proceeding slowly on this issue as it inevitably marches toward legalized gambling. Key legislators there recognize that while fat gaming-tax receipts are desirable, there is a cost to high taxes.

It is likely to be quite helpful in the long run that a growing number of public officials recognize that casinos cannot prosper in an environment where states increase taxes - or increase the number of gaming locations - in order to make up for revenue shortfalls.

The American Gaming Association has been sounding the alarm bells on this point for a long time. So maybe it is finally getting through.