Budget & Tax
Tribal stances on gaming-fee increase contrast with past tax-increase position
August 5, 2019
In 2018, officials with the Chickasaw Nation, Choctaw Nation of Oklahoma, and Quapaw Tribe of Oklahoma were among those endorsing the "Step Up Oklahoma” plan, which ultimately resulted in legislation that sought nearly $600 million in annual tax increases, including increased taxes on Oklahoma drivers’ purchases of fuel, additional taxes on employers in the energy industry, and higher tobacco taxes.
Now, less than two years removed from that debate, those same tribal entities are opposed to Gov. Kevin Stitt’s call to renegotiate tribal gaming compacts and possibly increase the “exclusivity fee” paid by tribes, which acts as a de facto tax.
Where some see the two debates as entirely separate, others see a flagrant flip-flop.
“It goes back to that old saying: Don’t tax me, don’t tax thee, tax that fellow under the tree,” said former state Rep. Jeff Coody of Grandfield, who served in the Legislature at the time of the Step Up debate. “Everybody wants everybody to contribute except when the finger turns to them and says, ‘Okay. How about you?”
But one tribal official said the dispute is not primarily about proposed increases in exclusivity fees.
“The question of a rate increase is not what has provoked the strong opposition from Tribes across the State,” Stephen Greetham, senior counsel of the Chickasaw Nation, said in a statement. “While no Tribe believes a rate increase is justifiable, our opposition stems from Governor Stitt’s declaration of his intent to walk away from our agreement—an intergovernmental compact that includes far more than mere revenue-share rates and has served all parties well.”
In a column that ran in the Tulsa World in July, Stitt called for renegotiating the state’s gaming compacts with Oklahoma tribes. Those compacts, which expire at the end of the year, give the tribes the exclusive right to operate casinos in Oklahoma, aside from a handful of “racino” racetracks that also have slot machines. In exchange, the tribes pay the state a fee for that exclusivity. The fee tops out at 6 percent on slot machines.
In comparison, the state-local sales tax rate on a bottle of water in Oklahoma averages 8.94 percent. In other states, the tax rates on non-tribal casino operations are often between 20 and 40 percent, and several tribal gaming compacts in other states include exclusivity fees in the 20-percent range. According to one estimate, 44 percent of tribal gaming compacts nationwide involve fees of 10 percent or greater.
Stitt said Oklahoma tribes generate an estimated $4.5 billion in annual revenue from casino operations. Under the current compacts, Oklahoma state government received $138.6 million of that total through exclusivity payments in 2018, which amounts to about 3 percent of total revenue generated by casinos.
In response to Stitt’s call for renegotiating the compacts, officials with 29 tribal governments in Oklahoma signed a letter saying they believe the compacts “automatically renew” on Jan. 1, 2020, and that “rates under the present Gaming Compact should not change.”
Tribal officials argue that increased fee payments to the state may reduce tribal government spending on education, health care, and transportation projects, and that Oklahoma state government would ultimately have to increase spending in those areas to make up the difference.
“We are a sovereign tribal nation with a fiduciary responsibility to serve our citizens,” Chief Gary Batton of the Choctaw Nation of Oklahoma said in a statement. “However, our values compel us to go above and beyond this responsibility to serve all people in southeastern Oklahoma. The Choctaw Nation supports public schools and partners with local communities to support roads, bridges, and many other infrastructure needs, as well as serving as the backbone of rural healthcare in southeastern Oklahoma. The businesses we operate have a positive economic impact and help support the regional economy, and we reinvest our profits into Oklahomans, not shareholders. Likewise, gaming exclusivity fees are not taxes. They were negotiated between two governments, and we have demonstrated for decades that our commitment and investment in Oklahoma goes well beyond exclusivity fee payments to the State of Oklahoma. We have been committed to terms of the compact, and are a proven partner to work collaboratively with the State of Oklahoma. The gaming compact has proven to be an effective way to serve Oklahomans.”
The arguments tribal officials have put forth about their broader contributions to Oklahoma, and the potential problems that could be created by an increase in exclusivity fees, echo those put forth by officials in Oklahoma’s energy industry during prior tax-increase debates.
The American Gaming Association has estimated that casinos support 75,000 jobs in Oklahoma and have an economic impact of nearly $10 billion in the state. While those are sizable figures, they don’t exceed the numbers generated by Oklahoma’s energy sector. A 2016 report by the State Chamber of Oklahoma Research Foundation showed that nearly 150,000 Oklahomans were either wage-and-salary workers or self-employed in the oil and gas sector, and that the associated $15.6 billion in household earnings accounted for 13.2 percent of total state earnings. The report found the oil and gas industry supported an estimated $65.7 billion in total state output.
Lawmakers still raised taxes on employers in the energy sector, and did so repeatedly, in recent years.
Critics also contend the economic-development arguments put forth by casino operators are fundamentally flawed because gambling is not comparable to any other business, including those subject to “sin taxes.”
“If you order a beer or a glass of wine or even get a cigarette—while those things certainly have a lot of danger to them and I’m not defending those things—you still get a glass of wine back,” said Les Bernal, national director of Stop Predatory Gambling, which opposes state promotion of gambling. “With commercialized gambling, it’s a financial exchange. And it’s a financial exchange that’s mathematically rigged against you so that inevitably you’re going to lose all your money. Success only comes at someone else’s expense. That’s why it’s like no other commodity out there. It’s like no other business, including other vices.”
While other businesses produce something of value that has a multiplier effect in the economy, Bernal said that’s not true of gambling.
“Commercialized gambling is milking existing wealth,” Bernal said. “It’s a sterile transfer of wealth. It’s a naked money grab disguised as economic development.”
Coody also says claims of the economic benefits created by Oklahoma casinos are more shell game than reality.
“They’re not producing anything. They’re not improving anything,” Coody said. “All they’re doing is redistributing income.”
Former state Rep. Mike Turner of Edmond, who now serves as vice-chair of the Oklahoma Republican Party, says those who suggest tribes were only willing to tax others without stepping up in 2018 are wrong.
“Very few people remember that the tribes actually came to the Legislature last go around and said, “We’re willing to pay more,’” said Turner, who stressed he was speaking as a private citizen and not as a state GOP official. “People forget about that, and most people don’t know that.”
That offer was made in exchange for the Legislature legalizing roulette tables at the casinos, he said.
Coody suggests the idea that altruism was the primary motive behind that offer is naïve.
“They’re always looking to expand and the only way they’re going to agree to give anything up is when they think they’ve got more to gain from the state allowing them some type of expansion of their games,” Coody said.
Turner also said the governor’s call to renegotiate the compacts will likely go nowhere because the “plain text” of the agreements says the compacts automatically renew unless both parties want to renegotiate. So long as the tribes decline to renegotiate, he said, the compacts renew as is.
“Every attorney that I’ve talked to says, ‘Yeah, it rolls over,’” Turner said.
For Bernal, the debate over the exclusivity fee paid by Oklahoma tribes misses the big picture.
“It doesn’t matter, whatever you tax it, it’s a rip off for all citizens,” Bernal said. “And so if the tax is 6 percent or 15 percent, it’s still a loser for the people of Oklahoma. The guys that run the games, they’re still going to win, regardless. To me, it’s almost an irrelevant argument.”