|Gaming stocks fell on Monday as news broke that the Illinois General Assembly passed a proposal that would raise taxes on riverboat casinos as high as 50% - the biggest gambling tax hike in the US. Illinois is the fourth largest gaming market in the U.S., after Nevada, New Jersey and Mississippi.|
The proposal is expected to hit Illinois’ biggest casinos – Mandalay’s Grand Victoria Elgin, Harrah’s Joliet, Argosy Gaming’s Joliet Empress and Hollywood Casino’s Aurora properties.
The tax rates increased from 35% to 50% on annual revenues over $200 million, while taxes on smaller revenue amounts creeped up by at least 2 percentage points. The governor is expected to sign the bill into law within the next several weeks.
'The proposal ended up being more negative than expected,' said Jason Ader, a gaming analyst for Bear, Stearns & Co. Investors are likely to associate all riverboat casinos with a higher degree of risk, which will put pressure on stocks with non-Nevada operations, he said. 'The Illinois tax decision underscores greater risk of some of these riverboat markets. Investing in Vegas is a safer and more stable bet for investors.'
Harrah's spokesman Gary Thompson said 'it is going to be interesting to see how [legislators] explain the inevitable carnage that occurs as a result of this capricious, outrageous increase.'
Indiana's legislature is also considering an increase in casino taxes, while relaxing gaming laws and permitting riverboat casinos to remain permanently docked. A more aggressive tax increase would call for investors to show caution, but dockside jurisdictions have historically led to increases in gaming revenues, analysts said.