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Do casinos deserve tax breaks?

May 15, 2014

Riding on the promise that a casino will boost their local economy, counties and municipalities in the Hudson Valley/Catskills are racing to compete with one another to win one, or possibly two of these moneymakers to locate within their borders. The jockeying for position in this kind of competition frequently includes offering tax breaks as a way to attract new businesses.

Orange County legislators have already signaled they are opposed to a payment-in-lieu-of-taxes (PILOT) deal for casinos.

Now the question is facing Sullivan County legislators—whether to sweeten the pot by offering tax incentives to lure these wealthy corporations here.

Basically, a tax incentive is a subsidy to a specific business intended to foster economic growth by forgiving or deferring taxes, thus allowing a company to invest more in its business than it otherwise might have. But because every dollar in taxes forgiven or deferred is a dollar of revenue lost to the taxing authority, rewarding tax incentives requires a tricky balance when weighing the costs and benefits to the community.

While Sullivan County already has a tax incentive program for destination resorts (it exempts a business’s mortgage taxes, sales tax during construction and waives property taxes for up to eight years), some, like Legislator Alan Sorensen, have expressed doubt that casinos should be treated as resort destinations. (For background, one casino bidder, Empire Resorts and its partner EPR Properties, were approved for a destination resort tax break for a project proposed prior to casino gaming being approved for upstate New York. For now Legislator Ira Steingart, chair of the board of the Sullivan County Industrial Development Agency (IDA), is saying that if the IDA receives additional requests for tax breaks from other casino bidders, they will review the applications as they get them.)

As Sullivan County officials weigh their decision on this matter, we offer some thoughts about dispensing tax breaks.

Beware: history indicates that not all tax incentives pay for themselves.

A thorough cost/benefit analysis must accompany each specific scheme being considered.

On one side, everything depends on the casinos’ ability to create a meaningful number of jobs and to generate additional local business, thus boosting the economy.