Illinois Tax increase hits casino stocks
By Paul
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.

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