On Wednesday, New Jersey regulators will release the March gaming revenue numbers. With the Atlantic City casinos closed for the second half of the month, the numbers won’t be pretty.
But in terms of tax revenue lost, they will not be nearly as bad as Pennsylvania, which took in more than $1 billion last year compared to $300 million in New Jersey. Much of that is due to the tax rate exceeding 50% on slots in Pennsylvania — about five times what New Jersey casino operators pay.
But New Jersey has additional losses that its neighbor does not.
The difference in the tax rate leads to Atlantic City having more lavish casinos, which leads to more high-end casino hotel nights, more dinner and drinks, more shopping, and so on.
On the other hand, just under two-thirds of the state’s direct gambling tax revenue last year came from brick-and-mortar casinos. Almost 25% came from online casino gaming — taxed at a slightly higher rate — while 13% came from sports betting.
March Madness vs. no March Madness
In March 2019, New Jersey took in $25.5 million in total gaming taxes.
That included $16 million of brick-and-mortar taxes, $522,000 from sports betting at the nine casinos, $3.2 million from sports betting online, and $5.9 million from online casino play.
The first figure likely will be more than cut in half, because no March Madness in Atlantic City means far fewer hotel room visitors who, while perhaps mainly focused on NCAA men’s basketball, also likely would have tried their luck at other forms of gambling during their stay.
Sports betting taxes from the casinos, what little there is, also will be mostly wiped out.
If there is a possible savior for the New Jersey Treasury, it’s online casino gaming. When the state Division of Gaming Enforcement comes out with its March figures, it will be worth noting to what extent online casino derived a boost from being, in the eyes of some gamblers, “the only game in town.”
Still, even optimistic estimates would likely leave New Jersey with a shortfall of north of $10 million in gaming tax revenues, compared to last March.
Tens of thousands of furloughed casino workers, meanwhile, will result in further tax collection declines. Those workers aren’t likely to have been making lavish purchases last month that would have led to state sales tax revenues.
As for consumers, the lack of travel adds up in fewer state tax receipts across the board. A Manhattanite who would have driven to Atlantic City would have spent $30 or so on gas — it’s cheaper in New Jersey — with at least $5 of that going to New Jersey’s budget.
That doesn’t sound like much, but the ancillary tax benefits lost to the state will add up.
Now, the really bad news
April, of course, will be even worse.
In April 2019, Atlantic City casinos sent $23 million in taxes to the state.
Brick-and-mortar state tax revenues figure to dip from $15 million to zero, with another $400,000 in casino sports betting taxes going by the wayside and the $2.2 million in online sports betting becoming only a shell of its 2019 self.
So that’s more than $16 million in lost tax revenue for April.
Online casino gaming taxes were $5.5 million a year ago, and that number figures to rise.
But even a $3 million turbocharge in online casino tax revenues still would leave the state in a $13 million-plus hole.
While the numbers pale compared to Pennsylvania, it’s not just casino operators who will feel the economic pinch from the COVID-19 pandemic. Taxpayers will take a hit, too — both directly, and indirectly, from the widespread shutdown of gambling options.
Recent estimates on the decreasing number of new daily hospitalizations in New Jersey are encouraging. And Atlantic County as a whole has escaped the brunt of the pandemic that has plagued North Jersey.
But the race against time continues. Atlantic City’s three biggest revenue months by far are June, July, and August.
Can this pandemic be sufficiently tamed in time to salvage the city’s boom tourist period?
Image courtesy of Shutterstock.com
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