Video gambling ‘push tax’ sparks industry pushback — but is proposed ban a favor to operators?

Leaders of a southwest suburb want to increase their cut of the action in the lucrative video gambling market with a first-of-its kind local tax, but a new bill filed by a powerful state lawmaker could block them from upping the ante.

The so-called “push tax” approved last fall by Oak Lawn village trustees would charge gamblers a penny every time they push a button to place a bet at one of the 200 slot machines sprinkled across 40 bars, restaurants and lounges in town.

That prompted an outcry from executives at Illinois’ largest video gaming terminal operating company concerned with how the sin tax would hit their bottom line. Last week, state Rep. Bob Rita filed a bill in Springfield that would give the state “exclusive” taxing power over video gaming.

Sun-Times files

The Blue Island Democrat who has shepherded gambling bills in the statehouse for years — including the massive gaming expansion signed into law last summer by Gov. J.B. Pritzker — says his legislation prevents a “patchwork” of local fees and taxes from hurting small businesses.

But Oak Lawn Trustee Tom Phelan says Rita is carrying water for video gaming industry interests he says are swimming in cash while towns like his are drowning in pension debt.

“It’s like they’re deigning to give us scraps and we should be happy with what we’ve got,” Phelan said Friday.

The new gaming law slightly raised taxes on gross video gaming revenue to 33% this fiscal year and 34% starting this summer, still well below several other states that tax video gaming profits at rates of 50% or more.

In Illinois, five-sixths of the tax revenue goes to the state and the remainder to the local government where machines are located. Terminal operators and the establishments that house their slots split the bulk of the profits.

Gamblers lost nearly $15 million at the machines in Oak Lawn last year, according to Illinois Gaming Board records. That sent almost $4 million to the state and about $747,000 to the village, while establishments and terminal operators took home the rest of the $10 million-plus windfall.

“We’ve been collectively frustrated with the village’s video gaming returns for years,” Phelan said.

Village of Oak Lawn

So the board of trustees passed the penny-per-play tax in November, which Phelan says “taxes the gambler, not businesses or terminal operators,” and would stave off another property tax increase for the cash-strapped village.

Though other towns have enacted various local video gaming license fees, Oak Lawn’s concept is thought to be the first “push tax” imposed in the state. The Gaming Board doesn’t track municipal gaming ordinances, but an agency spokesman said he wasn’t aware of anything similar.

Oak Lawn’s tax went into effect in January, but the village has not yet collected any of the revenue.

The idea sparked interest from a handful of other towns that requested information from Oak Lawn in search of revenue boosts of their own, Phelan said.

But that’s not how they saw it at Accel Entertainment, the state’s largest terminal operator. Last month executives threatened to pull their machines from the town, according to Phelan — a dubious claim considering their contracts with individual establishments, he said, and something of an empty threat to the town that generated the 10th most video gaming revenue last year of all municipalities that allow it.

“There are plenty of terminal operators who would be happy to come scoop up their business,” Phelan said.

Accel representatives didn’t return messages seeking comment.

Rita filed his bill last week and says it’s aimed at statewide economic development, not “one community.”

“We need to have a full debate in Springfield over our tax and fee structure at the state and local level on video gaming machines, not a patchwork of local fees and taxes around the state that drives businesses and economic activity away,” Rita said. “We should have a consistent policy that supports our small businesses and communities and gives everyone the best chance to succeed. I would encourage anyone with concerns on these issues to join us for the debate at the Capitol during this spring legislative session.”

Phelan says Oak Lawn leaders intend to do just that and are already drumming up opposition to Rita’s bill, which was referred to the House Rules Committee on Tuesday.

State Rep. Kelly Burke, an Evergreen Park Democrat whose district encompasses most of Oak Lawn, said Friday she hadn’t yet reviewed the legislation and hasn’t decided if she’ll support it.

State Sen. Bill Cunningham, D-Chicago, is the new point person for gaming legislation in the state Senate, and his district includes Oak Lawn. He didn’t return messages seeking comment.