Unknown tax rate for North Jersey casinos raises questions over A.C.'s share

Sweeney’s remarks came after Assemblyman Chris Brown, R-Atlantic, raised the tax rate issue at an Assembly Judiciary Committee hearing. The committee advanced a bill Monday that would ask voters to approve up to two North Jersey casinos.

Sweeney told reporters after the vote that the tax rate for the casinos would be determined in the enabling legislation, but said it would be less than 50 percent, his spokesman confirmed.

Up to one-third of tax revenue generated from the new casinos would be sent toward redeveloping Atlantic City under a proposed constitutional amendment. Sweeney, D-Gloucester, Salem, Cumberland, has estimated that $200 million annually could be pumped into a non-profit charged with helping the resort.

But Brown said Wednesday that a tax rate lower than 50 percent makes it impossible for the bill's sponsors to live up to their promise of sending that much money toward redeveloping Atlantic City.

Citing Deutsche Bank, which said North Jersey casinos could generate $500 million in revenue, Brown said even a 50 percent rate would only put $250 million in the state’s coffers.

That tax revenue would then be split among the host municipalities of North Jersey casinos, senior and disabled programs, the horse racing industry and Atlantic City.

“The numbers simply don’t work,” Brown said. “The legislation outlines a complicated formula for the appropriation of tax revenue generated by two North Jersey casinos, which we now know will be based on a lower tax rate, and won’t generate the sufficient revenue.”

Gordon MacInnes, president of New Jersey Policy Perspective, a left-leaning think tank, raised similar concerns in a written testimony presented to the Assembly Judiciary Committee.

“How does the committee know how new casinos will aid Atlantic City and the state’s perilous financial condition without proposed tax rates?” his testimony said.

Richard McGrath, a spokesman for Sweeney, said: “Anyone who suggests that there won’t be substantial resources allocated for economic development work for Atlantic City and the region is either mistaken or is being misleading.”

Atlantic City casinos pay an effective tax rate of 9.25 percent on gross gambling revenue. Pennsylvania casinos pay an effective rate of 55 percent.

When first proposing North Jersey casinos in a 2014 op-ed, Sweeney said the new casinos should pay a 50 percent tax rate.

But an amendment to the North Jersey casino proposal has changed things. Sweeney believes the $1 billion investment requirement for each casino license means a 50 percent tax rate would be too high, McGrath said.

McGrath said the immediate priority for Sweeney and fellow sponsor Sen. Paul Sarlo, D-Bergen, Passaic, is getting the proposed constitutional amendment passed by both houses of the Legislature. They have said the tax rate should be determined in the enabling legislation.

Brown said leaving the tax rate unspecified until later leaves the Legislature under pressure by potential developers to keep the tax rate low in order to attract casinos.