When Maryland legalized slot machines almost a decade ago, they envisioned massive profits for their Education Trust Fund. However, due to various stipulations in their contracts with casinos, the Terrapin State suddenly finds themselves on the losing end.
The biggest problem is that it requires as much as $30,000 to buy each slot machine, plus another $2,000 in annual maintenance. This puts the state’s cost at around $50k per decade for each slot machine they provide to casinos, at no cost to the latter.
The largest four Maryland casinos own their slot machines, but Rocky Gap Casino and the Casino at Ocean Downs don’t. Maryland must pay $14 million per year to provide the slots for both of these casinos.
As the Baltimore Sun reports, proposed legislation would give Rocky Gap and Ocean Downs a 10% tax break if they buy the slot machines before the beginning of 2010. While this sounds like a good proposal, the Education Trust Fund would actually lose $10 million per year, while the state would pay a $1.6 million penalty for breaking a contract with slot machine companies two years early.
The incentive for these casinos to purchase the slot machines is that, after 2020, they’ll have to buy them anyways and get just a 6% tax cut. Currently, MGM International at National Harbor; Horseshoe Casino in Baltimore; Hollywood Casino in Perryville; and Maryland Live Casino in Anne Arundel County all receive an 8% tax cut for owning their slots.
Del. Frank Turner, a Howard County Democrat who helped implement the bill that brought casinos to Maryland, said the state originally offered to purchase the sot machines at no charge to casinos to make the massive tax rate bearable.
“You can’t have the companies pay a 67 percent tax rate and give them nothing in return,” said Turner.
But even with a 55% – 59% tax rate, the state isn’t making out like they thought due to the maintenance costs.