Three years ago, when Maryland voters were being asked to expand the number of casinos in the state and legalize table games, the CEO of Caesars Entertainment Corp. stopped by The Sun to make his pitch. He noted that doing that sort of thing, whether it was talking to a newspaper or to the state legislature, was a huge part of his job. The nature of the casino business, he said, is that once a state legalizes gambling, the industry will be back year after year looking to change the rules to its advantage in one way or another.
In Maryland, this year's edition of that truism is a tricky one. The state's five casinos have banded together to ask state regulators to reduce the average payout they must provide from their slot machines. Currently, it's set at between 90 percent and 95 percent, and the casinos would like to drop that to 85 percent. Ordinarily, it might be easy for state officials to say no to a proposal that would further line the pockets of the casino owners, but this particular one has something in it for the state as well. Quite a lot, actually; two thirds of the money casinos gain from that change would go to the state in the form of taxes.
How much would that amount to? On average, Maryland's casinos paid out in winnings 90.38 percent of the money gamblers plunked into slot machines in fiscal 2014, according to the American Casino Guide. The Horseshoe Casino has opened in Baltimore since then, but if we assume the rate has held more or less steady, that means gamblers have plunked nearly $6.5 billion into slots so far this fiscal year. Dropping the payout by 5 percentage points would mean more than $200 million in additional taxes for the state and $100 million more in revenue for the casinos, all else being equal.
Casino operators told The Sun's Jeff Barker that they don't intend to drop the payout by that much. Rather, they say they want to be able to offer different games and different jackpot structures that would appeal to customers. For competitive reasons alone, they would probably be unlikely to reduce the "hold" all the way to 85 percent. Doing so would drop Maryland well below any of its regional competitors in the payout rate for gamblers; presently, it's in the middle of the pack.
But one thing's for certain: The rule change wouldn't prompt the casinos to start giving more of the betting handle back to their customers. The industry has long complained about Maryland's tax rate on slots, which is among the highest in the nation, and notwithstanding a recent request by the Rocky Gap casino to add a few dozen more machines, the trend in the state has been for casinos to remove slots and add more table games, which are taxed at just 20 percent. The casinos acknowledged in their filing with the Maryland Lottery and Gaming Control Agency that part of their motivation is the competitive pressure they feel from other states where slots tax rates are lower.
Much of the public policy discussion in Maryland recently has centered around the question of how much the government is getting out of the casinos. Baltimore Mayor Stephanie Rawlings-Blake blamed her decision not to lower property taxes next year on the disappointing payments the city has received from the Horseshoe Casino. Lawmakers in Annapolis this year considered raising the tax rate on table games to 30 percent in order to make sure that the shift in gambler preferences (and casino business strategy) doesn't wind up costing the state's education trust fund. Del. Eric G. Luedtke, the Montgomery County Democrat who co-chairs the state's Joint Committee on Gaming Oversight couched the question of reducing required slots payouts in similar terms in an interview with Mr. Barker: "If people feel they're getting a bum deal, they're not going to play," he said. "I would worry that players in Maryland might consider going elsewhere if they felt payouts were higher in neighboring states."
As regulators take up the casinos' proposal this summer, we would ask them to consider an often unheard constituency: the gamblers. The money we're talking about, after all, would come out of their pockets. Many who frequent Maryland's casinos can afford it and wouldn't be affected much by a change of a few percentage points in the average payouts. But others cannot. When Maryland legalized slots seven years ago, its law was carefully calibrated not just to maximize state revenue but also in hopes of minimizing the social costs of gambling. We hope state regulators will still take the latter priority into consideration and not just the former.