The AGA at 10: A Look Back...And Ahead

Ten years ago this month, I took the reigns of a new organization to protect the interests of the commercial casino industry in our nation’s capitol.  Back in the mid-1990s, the gaming industry looked very different than it does today.  The industry had just recently expanded beyond Nevada and New Jersey, but while commercial casino gaming was beginning to develop a national presence, the industry lacked a unified voice to support it on national issues that could affect its businesses and employees.

All that changed in 1994, when the Clinton administration proposed a 4 percent federal income tax on gross gambling receipts.  The proposal never materialized, but it served as a wake-up call to the industry that our growth had made us a target for federal intervention.  The individual companies determined a united front would be the most effective way to address the growing number of industrywide issues, and thus the American Gaming Association (AGA) was born. 

The AGA’s first priority has always been to represent the commercial casino-entertainment industry and its employees by addressing federal legislative and regulatory issues affecting our members, and we have met with tremendous success in that arena.  The industry has faced many threats during the past decade, but with the help of the Nevada delegation and representatives from other gaming states, no adverse federal legislation has passed since the AGA has been in existence.

Through the years, we’ve enjoyed a number of accomplishments, from our successful coordination of the industry’s response to the National Gambling Impact Study Commission to our extensive efforts to address responsible gaming through the creation of the National Center for Responsible Gaming, the AGA Code of Conduct for Responsible Gaming and other industrywide initiatives. 

We’ve also led the way in making diversity a priority in both the employment and purchasing arenas, commissioning the first-ever snapshot of employment diversity in the commercial casino industry and creating business opportunities for minority- and women-owned and disadvantaged businesses at our annual Opportunity Expo events.

In 2001, the AGA created a vehicle to help the industry achieve its goals for professional and business growth through the development of Global Gaming Expo, which over the past five years has grown to attract more than 25,000 attendees and more than 700 exhibitors from around the world.

Today, the AGA is recognized as the leading national voice on the U.S. commercial casino industry, and our programs serve as a model for the international gaming community.  In celebration of the AGA’s 10th anniversary, we will be releasing a series of white papers offering a look back at some of the industry’s accomplishments over the past 10 years, as well as thoughtful analysis of key issues ranging from the economic and community impact of the industry, employee wages and benefits, gaming as entertainment and recreation and the impact of the industry on Wall Street.

The first of these white papers, to be released early this month, is authored by Eugene Christiansen, a leading gambling and entertainment industry analyst.  The paper focuses on the impact of gaming privilege taxes, which during the past few years has emerged as one of the leading threats to the continued success of our industry.  The thesis of the paper echoes much of what I have written in these pages over the past few years, namely that unreasonable tax rates on gaming can have the opposite effect legislators intend – thwarting capital investment, forcing job cuts and ultimately leading to long-term revenue losses.

Christiansen uses hard economic data and concrete examples to back his assertion that low tax rates are the key to realizing jobs, capital and, ironically, higher tax revenues.  He notes that, of the more than $30 billion that has been invested in major U.S. casinos or casino resorts since 1989, fully 91 percent was invested in Nevada and New Jersey, the two states with the lowest gaming privilege tax rates of the 11 states with commercial casino gaming. 

Clearly, these low tax rates have given Nevada and New Jersey a tremendous advantage in the competition for gaming-related capital investment, and that advantage is a strong argument for keeping gaming privilege taxes low in those states.  But these low tax rates do more than attract investment capital – they make larger, more diverse gaming facilities possible.  These full-service resorts contribute more to the economy than machine-only facilities can, but the capital investment necessary to develop them simply isn’t feasible if tax rates are too high.

Christiansen goes on to show how invested capital creates gaming industry jobs and that, as gaming privilege tax rates rise, gaming-related employment falls.  The extraordinarily high tax rate set by legislators in New York has led to the state being unable to attract the capital needed to refurbish the two metropolitan area racetracks designated for machine operations in 2001.  As a result, the jobs and tax revenues New York anticipated have not materialized. 

Christiansen’s paper is a cautionary tale, one with which those of us in the industry are all too familiar.  Lawmakers in newer gaming jurisdictions have been opting for higher tax rates, trading jobs and capital investment for short-term government revenues and quick fixes to looming budget crises.  Even more troubling, Christiansen notes that today gaming privilege taxes are growing at a faster rate than the tax base.  Since 1994, the average privilege tax for commercial casinos in the United States has increased by 60 percent – significantly higher than the rate of increase for gross gaming revenues over the same period.

Despite these new threats, the future of the U.S. commercial casino industry looks bright.  Our industry is united and strong, and the AGA’s proven track record of protecting the interests of our member companies and their employees bodes well for our ability to meet the next challenges.  I look forward to working with my colleagues in the gaming industry and government to address the next generation of issues affecting our business.  I am confident our next 10 years will be just as fruitful as our last.