HB 3136, which passed through the Illinois Senate and House last week, allows municipalities to charge a “push tax” on video gaming terminals (VGTs).
The catch, however, is that the towns needed to adopt the push tax before Monday in order to impose it in the future. As such, the Calumet City, Dolton, Markham, South Chicago Heights and University Park village boards and city councils did so on Sunday.
A push tax, in this case, refers to charging players one cent each time they play a game at a VGT.
Oak Lawn came up with the push tax in 2020 in an effort to generate more municipality revenue. Almost instantly, the VGT industry sued Oak Lawn. Waukegan would eventually join the village in its suit.
The story behind the push tax in Illinois
Oak Lawn invented the push tax because it was upset that it wasn’t getting a proper cut of VGT revenue.
In 2019, new gaming legislation increased the state’s VGT revenue split from 25% to 29%. However, municipalities’ cut was 5% then and remains 5% now.
Oak Lawn Trustee Paul Mallo told The Patch Oak Lawn:
“It was outrageous that the video gaming industry left the municipalities in the cold when they re-cut the revenue-sharing pie. We are talking billions of dollars in revenues, and the municipalities are the ones burdened with the responsibilities of providing police and emergency services, and for keeping the streets clear to enable businesses to operate in a safe and inviting community.”
Mallo added:
“We consulted with many Oak Lawn bettors and our research showed that they averaged between 100 and 200 bets each time they played, so we didn’t feel a $1 or $2 tax was unfair, and neither did they.”
Previously, the Illinois Gaming Machine Operators Association has argued that the push tax is unconstitutional. Detractors cite difficulty in tracking each play and placing the tax burden on the gambler, which could discourage them from continuing playing.
Which, in turn, could hurt the operators. Homer Glen, for instance, rejected the tax. Mayor George Yukich said the push tax “hurts the business,” per the Chicago Tribune.
Mike Pappas, an Accel Entertainment executive, told the village board that a push tax — even at a penny per push — could sway gamblers to go to other towns that don’t charge a tax.
For what it’s worth, Oak Lawn has reaped the benefits of the push tax. It expects to generate about $1 million in extra annual revenue because of it.
Illinois is raking in huge tax revenue from VGTs
The main reason for the infighting is that VGTs generate tons of revenue. Even a 1% tax can pay huge dividends down the line.
At 29%, the state is getting a hefty cut. And in September, VGTs generated $61.3 million in state tax revenue for Illinois.
For reference, that’s only about $10 million less than what sports betting has produced for the state in its lifespan.
What else was in HB 3136?
HB 3136 is a significant bill that contains some fundamental changes for the Illinois gaming industry.
In addition to the push tax, there are a few key sports betting changes.
Perhaps most importantly, the bill gives a firm end date for in-person sports betting registration. That is March 5, 2022, though it could end earlier.
The bill also legalizes betting on Illinois college teams, which wasn’t allowed previously. However, there is an in-person stipulation, meaning Illinoisans will have to visit a retail sportsbook in order to place one of these bets. Live wagers also aren’t permitted.
Also, as a result of the bill, Wintrust Arena would be able to apply for a retail sports betting license. The legislation is now just pending Illinois Gov. JB Pritzker’s signature.
