Amendment 50 Meets State’s Budget Woes -- Hickenlooper Replaces Gaming Commission

In most states casino tax rates are set by the legislature, but in Colorado the 5 members of the Colorado Limited Gaming Control Commission (or the voters of Colorado) approve tax rate changes. For instance, in May of 2008 the commission approved a targeted tax cut for casinos with revenues of less than 8 million dollars.

This year at the May 19 meeting the 4 attending commissioners approved a controversial across-the-board 5% cut in the casino tax rate to provide financial relief to the industry, despite some of the bigger casinos bringing in large profits. Casino tax rates are based on net revenue (officially called Adjusted Gross Proceeds equal to bets minus payouts); higher revenue determines a higher tax rates. On July 1 the top tax rate changed from 20% to 19%. The other tax rates went from 0.25% to 0.2375% (under 2 million dollars in AGP), 2% to 1.9% ($2M to $5M), 9% to 8.55% ($5M to $8M), 11% to 10.45% ($8M to $10M), and 16% to 15.2% ($10M to $13M).

On June 6 the 5 members of the commission unanimously rejected requests from the Colorado Community College System and History Colorado to reverse the impending tax cut. (Prior to Amendment 50 25% of the gaming tax revenue went to historic preservation. Passage of Amendment 50 in 2008 empowered local voters in gaming communities to increase the bet limit from $5 to $100 with 78% of the resulting increased tax revenue going to community colleges.)

Governor John Hickenlooper was unhappy with the casino tax rate cut, especially given the state's current budget woes. On July 6 he reminded us that the commission members serve “at the pleasure of the governor” with his decision to replace the entire commission. Hickenlooper was already due to replace two of the members whose terms expired in early July.

The rules for reversing the casino tax rate cut are unclear. It may be that the new commission can just vote to reverse it. It is clear, however, that Amendment 50 prohibits the commission from setting any tax rate ABOVE the previous level (in effect since July 1, 2008). A statewide vote of the electorate is required to increase casino tax rates above the July 1, 2008 level.