Would Chicago’s casino tax plan raise city’s take?

During her visit to Springfield last month, Chicago Mayor Lori Lightfoot pressed state lawmakers to lower tax rates on a future city casino after a consultant found the tax burden would be so heavy it could seriously jeopardize the casino’s ability to turn a profit.

But in an interview conducted in mid-November shortly after the legislature’s fall veto session, a Republican state lawmaker claimed Chicago’s proposal would actually raise the city’s take of casino tax revenue while leaving the state with less cash for projects that could benefit communities across Illinois.

"They wanted lower taxes paid to the state and higher taxes paid to the city," state Sen. Dave Syverson of Rockford told WCIA’s Mark Maxwell in a sit-down at the capitol, which aired Dec. 8. "The amount of taxes would be the same, but Chicago wanted to keep more of it."

"As quick example," Syverson continued, "in all the other casinos in the state, the local community keeps 5% of the revenue and then the state gets an average of about 35%. Under this scenario, Chicago — instead of 5% — Chicago would be keeping about 22% or 23% of the revenue and the state would get half the amount of what every other casino in the state was paying."

There’s a lot of moving pieces in Syverson’s claim, but the text of the bill he was referencing makes clear Chicago would have to cut its share as well — a point the senator conceded when we spoke with him.

The plan Syverson referenced was introduced on the final day of veto session as an amendment to the gambling law that passed in the spring. It didn’t gain enough traction for a floor vote this fall, but lawmakers could take it up again when they return to Springfield next month. Lightfoot continues to push hard for a change to the original gambling bill, pointing to a state-mandated consultant’s report from August that called the tax structure on a Chicago casino "onerous."

The consultant report warned that after accounting for operating expenses the effective tax rate on the Chicago casino would be 72%, leaving a profit margin of only 1% or 2%, or even exceeding casino revenue entirely.

To address this, Democratic state Rep. Bob Rita of Blue Island introduced a city-backed plan to lower both state and city tax rates for Chicago’s casino, which is likely to become the state’s highest grossing.

The gambling bill that passed the General Assembly in the spring and was later signed into law by Democratic Gov. J.B. Pritzker calls for a 33.3% tax on the casino’s gross receipts dedicated to the city’s pension obligations. Rita’s legislation would have eliminated the city’s flat tax and replaced it with rates ranging from 10.5% to 34.7%.

"It would be a cut to the city, because you’re eliminating that 33% [flat rate]," Rita told us in a phone interview.

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Meanwhile, the state’s original graduated rates of 15% to 50% on the casino would have been lowered to a range of 12% to 40%, according to the bill.

The varying rates would be applied at different levels based on how much money the casino brings in under the plan. A similar series of graduated rates for both Chicago and the state would apply to revenue from table games.

When we ran the bill’s specifics by Syverson, he agreed the legislative language would cut rather than raise Chicago’s take.

"If, in fact, we use the strict definition of the bill and Chicago was only going to get the tax rates that you gave me … then I would concede that Chicago would get a little bit less money," he said. "Now, having said that, anyone with any common sense would say, why would Chicago introduce a bill that says, ‘We want less money’?"

Rita’s rejoinder: Without a lower tax structure that encourages companies to build and run a Chicago casino, there won’t be a casino for the city or the state to tax.

Still, Syverson remains concerned about the plan. He said his job as a state senator is to ensure Illinois doesn’t lose out on needed funding from a Chicago casino and noted Lightfoot and the Chicago City Council have other tools to further tax the casino without getting an OK from the legislature.

Speaking about a proposal to change the tax structure for a future Chicago casino, Syverson said the plan would lower taxes paid by the casino to the state and increase the taxes it pays to the city so that the overall amount would be the same but Chicago would "keep more of it."

That doesn’t entirely square with the language of the bill. As he said, it would have reduced tax revenue for the state — but it also would have lowered taxes paid to the city.

Syverson conceded that last point in response to our inquiry.

We rate his claim Half True.

HALF TRUE – The statement is partially accurate but leaves out important details or takes things out of context.

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