The two-sided coin: casino gaming and casino tax revenue in Indiana.

• Author: Landers, Jim

Legal gambling in Indiana comprises various forms and venues ranging from large-scale commercial casinos with Vegas-like slot machines and table games to small stakes gaming on bingo, raffles, and pull-tab ticket games conducted by nonprofit organizations.

The array of legal gaming in Indiana has grown to include lotto drawings and instant ticket games operated by the Hoosier Lottery and pari-mutuel betting at horse racetracks and off-track betting facilities. A mere twenty years ago, these forms of gambling were illegal in Indiana. This changed on November 8, 1988, when voters repealed the state's constitutional prohibition on lotteries. At that time, Article 15, Section 8 of the Indiana Constitution stated that, "[n]o lottery shall be authorized, nor shall the sale of lottery tickets be allowed." While this provision specifically prohibited lotteries and lottery ticket sales, it had been broadly interpreted over the years to prohibit other forms of gaming. (1) Thus, by repealing Article 15, Section 8, the voters gave the Indiana legislature the responsibility for deciding what forms of gaming, if any, could be conducted legally in Indiana.

In 1989, legislation was enacted to legalize the Hoosier Lottery and pari-mutuel betting on live horse races. The following year, legislation was enacted authorizing nonprofit organizations to conduct bingo, raffles, and other small stakes gaming often referred to as charity gaming. The legislature expanded the parimutuel law in 1992 to allow off-track betting facilities and, in 1993, after several years of consideration, enacted legislation to allow gaming on riverboat casinos.

In the years since, the legislature has augmented gaming laws at various times for various reasons, including allowing dockside and round-the-clock gaming at the riverboat casinos, the Hoosier Lottery to participate in foreign lotteries, and to establish a casino at French Lick. In 2007, the legislature authorized slot machine gaming at the state's two horse racetracks (see Racetrack Casinos sidebar) and, in 2008, authorized small stakes gaming on pull-tabs and the like in bars and taverns around the state.

This article focuses on the thirteen years of operation of riverboat casinos in Indiana and the growth in the supply of casino games statewide and explains the state excise taxes imposed on the casino owners. It also provides a history of the revenue generated from these excise taxes and reports the purposes for which these revenues have been utilized. We pay particular attention to the state's riverboat wagering tax, which is imposed on the casino's gaming win. The win comprises the wagering dollars retained by the casinos after prize amounts have been paid to winning players. The other excise tax imposed on the riverboat casinos is the riverboat admission tax, a head tax based on the number of gamblers entering the casinos. Note that all years referenced in this article are fiscal years unless otherwise noted. (2)

The wagering tax is by far the dominant revenue producer of the two excise taxes: it yielded $729.8 million in total revenue during 2008, compared to $81.2 million for the admission tax. More importantly, the wagering tax has become a major source of funding for the state's property tax relief program. In 2008, about $486.3 million in wagering tax revenue was directed to property tax relief. What's more, all wagering tax revenue from the two new racetrack casinos is dedicated to property tax relief. The tax on the racetrack casinos generated almost $5 million for property tax relief in 2008 based on less than one month of operations.

Supply of Riverboat Gaming

The riverboat gaming law authorized eleven casino licenses. The law established the Indiana Gaming Commission to approve license applicants, to regulate the gaming operations of each licensee, and to license and regulate the occupations and suppliers serving the riverboat casinos.

The 1993 riverboat gaming law as originally enacted required five riverboat casinos to operate on Lake Michigan, five to operate on the Ohio River, and one to operate on Patoka Lake in southern Indiana. The law also required that voters had to approve casino gaming at a referendum before a casino could be licensed to operate in their county or city.

Casino Aztar, located in Evansville, was the first casino to begin operating in December 1995. While the Lake Michigan and Ohio River licenses were filed and operating by 2000, the Patoka Lake license was never utilized because the Army Corps of Engineers would not allow a casino to operate on the lake. As a result, the statutory authority for the Patoka Lake license was repealed in 2003. In its place, the legislature authorized a casino to operate in a special historic district in French Lick. The French Lick casino opened in November 2006 and represents the eleventh and last riverboat casino to open under the current riverboat gaming law. Table 1 lists the state's riverboat casinos by location and opening date.

In December 1995, Casino Aztar opened with 1,267 electronic gaming devices (EGDs) and 70 table games. Since that first riverboat casino, ten more casinos have opened, supplying almost 17,000 additional EGDs and almost 600 additional table games. However, nearly all of this supply growth occurred between 1996 and 2001, with the opening of the Lake Michigan and Ohio River casinos. Belterra Casino, the tenth riverboat casino to open...