Four years ago, we endorsed the constitutional amendment that legalized slot machine gambling in Maryland, and we still support it. We think it would be wise for Maryland to eventually expand its gambling program to include table games like blackjack and poker, which would attract additional economic development and create more jobs. It might even be a good idea one day to allow a sixth casino in Prince George's County to take better advantage of the tourist and convention trade in nearby Washington, D.C. But we oppose Question 7, the gambling expansion measure on November's ballot, because it's a bad deal for Maryland's taxpayers.
It is in the state's interest to make sure that any expansion of gambling doesn't cannibalize the business of its existing casinos to the point that one or more of them becomes a white elephant or, worse, goes out of business. Gov. Martin O'Malley and lawmakers in Annapolis were keenly aware of that problem as they were crafting the proposal that eventually became Question 7 this summer — Maryland's existing casino owners, particularly Maryland Live owner David Cordish, made sure of that.
The state hired PricewaterhouseCoopers to study the matter and figure out whether the market could absorb another casino. The firm never produced a stand-alone report, and the state has not handed over any documentation of its work despite repeated requests from Republican leaders in the General Assembly. Instead, the Department of Legislative Services presented what it said was a consensus opinion of its staff and the outside consultants. They said the state would see a net revenue increase from adding table games and a sixth casino, but that conclusion did not take into account the possibility of lower tax rates for existing and future casino operators.
However, as the General Assembly moved toward August's special session, it became clear that both the existing casino owners and the prospective developers of a casino at National Harbor in Prince George's County would insist on lower tax rates, in addition to other concessions.
That might be reasonable, even necessary to ensure the viability of all of Maryland's casinos. The trouble is, the debate occurred before Maryland's existing gambling program was fully up and running. Maryland Live had only been open for a few weeks, so lawmakers had little data about how it would perform in the market once the initial excitement wears off. Baltimore's casino was two years away from opening, so they had no idea how that facility will affect the market. And lawmakers' attempt to guess what a new mega-casino in Prince George's County would do amounted to speculation on top of speculation.
The Senate, under the leadership of President Thomas V. Mike Miller, a chief booster of the Prince George's casino, quickly passed a gambling expansion bill that included tax rate reductions for existing casinos and other concessions, such as allowing 24-hour operations. The House of Delegates, more skeptical of gambling and more receptive to the intense lobbying by Mr. Cordish, was a different story. Many in that chamber had balked at the idea of cutting taxes for casino owners in the same year that they had increased income taxes for about a fifth of Maryland households. But with pressure mounting, the House Ways and Means Committee suddenly reversed itself and voted in favor of a bill that included even bigger tax cuts than the Senate did. That proposal was voted out of the House of Delegates the next day and sailed through the Senate with little debate. Governor O'Malley signed it without delay.
If Question 7 passes, Maryland Live's slots tax rate, now 67 percent, could drop as low as 49 percent. Baltimore's could go as low as 51 percent, and other casinos — including the one slated for Prince George's County — could see reductions as well. Maryland would go from having the highest gambling tax rates in the region to some of the lowest. It is no coincidence that Mr. Cordish, once a vociferous opponent of gambling expansion, has been completely silent on Question 7.
After Question 7 was on its way to voters, the Department of Legislative Services had a chance to crunch the numbers and figure out what the last-minute tax cuts would mean. DLS analysts concluded that once a Prince George's casino is on line and fully operational — something that won't happen until mid-2018 — the changes to Maryland's gambling program made during the August special session would add a total of $808 million to the state's net gambling revenues. But a key provision of the legislation — a shift in the responsibility to buy the machines from the state to the operators — goes into effect whether Question 7 passes or not, so the actual impact of the referendum is smaller, about $653 million.
Of that, the state's educational trust fund gets $143 million, or 22 percent of the total. Local governments and the horse racing industry get a bit more. But the casinos get $487 million, or nearly 75 percent of the total new revenue generated by Question 7.
That bears repeating: We get 25 percent, casinos get 75 percent.
During the last few months, Marylanders have witnessed a staggering advertising war between two casino giants — MGM, which wants to build the Prince George's casino, and Penn National, which wants to prevent new competition for its marquee property in West Virginia. The ads on both sides have been misleading at best and dishonest at worst. MGM and Penn National have spent tens of millions of dollars to debate whether the money from Question 7 would go to education, whether the jobs created by table games and a new casino would actually go to Marylanders, and whether Question 7 would stop Marylanders from gambling in West Virginia.
Neither has Maryland's best interests at heart, and neither is addressing the real question here: Is Question 7 the best deal we can get? The answer is unequivocally no. Marylanders should reject Question 7 and tell our lawmakers to come back with a plan that puts our needs first, not those of casino owners.