A video gaming terminal (VGT) “push tax” went into effect in Oak Lawn on Jan. 1. To say it’s caused controversy would be an understatement.
The push tax assesses Illinois gamblers a penny each time they use one of the gaming machines. The Oak Lawn village fined 13 VGT operators in late July for failing to submit forms required by the city’s ordinance.
Well, the operators are fighting back.
The issues with push tax
The Illinois Gaming Machine Operators Association represents the terminal operators. It argues that the push tax violates the Video Gaming Act, which prohibits player tracking. Furthermore, the association says the ordinance would be costly and technologically difficult to implement.
“My understanding is that’s not something that all terminal operators have the ability to do,” Kim Walberg, an attorney representing the operators, said at a hearing on July 15. “We simply cannot do what you’re asking us to do.”
But Rick Meitzler, the president and CEO of Novomatic Americas Sales, a gaming equipment operator, contradicted Walberg in his testimony — at least on that point.
“Every time a handle is pulled, we meter it, and it’s inside each machine, it’s up to the state or the system to pull that data.”
Mayor Sandra Bury issued $500 fines to the 13 operators a week after the hearings. On that note, she says a key component of Walberg’s case doesn’t hold up.
“I don’t think they’re going to have much success because their own expert invalidated their entire argument during the push tax hearing.”
Push tax intended to balance budget
The 200 slot machines located in Oak Lawn’s bars and lounges generated almost $15 million last year, according to the Illinois Gaming Board (IGB). The state’s new gaming law places a 33% tax on gross revenue from the VGTs to be split between the state and local governments.
But in Illinois, 83.3% of that figure (almost $5 million, in this case) goes to the state, leaving Oak Lawn with less than $1 million. So, the push tax passed in an effort to drive revenue for the village.
According to the Chicago Tribune, it was expected to generate about $1 million this year before COVID-19 played spoiler.
“We don’t want to bring them to their knees,” Bury said of the terminal operators. “But we want to be able to provide services for our taxpayers.”
Waukegan City Council also approves push tax
As local governments scramble to generate revenue amid COVID-19, Waukegan will also implement a push tax that passed in April.
“I hate to be a bit of a pessimist, but we don’t know how much longer this is going to go on, we don’t know how many businesses may not reopen, how much tax revenue we’ve lost, not to mention our income tax share from the state of Illinois could take a huge hit,” Alderman Greg Moisio told the Tribune. “We don’t know how much revenue we’re going to lose.”
As is the case in Oak Lawn, Waukegan businesses are pushing back.
Alderman Keith Turner says he received a letter signed by 30 business owners voicing opposition to the tax. The letter cites how much of an impact the COVID-19 pandemic already has had on their industry.
It’s important to note that the tax is levied on the VGT operators, not the businesses themselves. Perhaps there is either confusion among business owners or a fear that the tax will serve as a disincentive for gamblers.
Legislation in Springfield to ban such a tax
State Rep. Bob Rita introduced legislation to ban ordinances such as the push tax, but Waukegan city attorney Bob Long doesn’t believe it has momentum. Long said:
“It’s nothing more than just a proposal before the legislature. I haven’t heard that it’s going anyplace. Whether it does or doesn’t is going to be up to the General Assembly in Springfield when it reconvenes. I’m not even sure when it’s going to reconvene at this point, frankly.”
If that’s the case, more and more cities may try to implement a push tax. Local governments will be curiously following what happens in Oak Lawn and Waukegan.