As the three-year stalemate on Tennessee tax reform continues to drag along, legislators have discussed and discarded almost every conceivable tax available for state revenue.
In addition to the hot-button income tax, there continues to be talk of a major tax on automobiles, a return to a state property tax abandoned to local governments in 1947, higher sin taxes, and elimination of all exemptions to the sales tax.
But there hasn’t been much open discussion about gambling. There are a lot of factors: the state’s basic conservatism, the buckle on the Bible Belt realities, and a general assumption that the state constitution prohibits all legalized gambling, which it doesn’t.
Times change, and old assumptions may no longer be true. Remember that the modern lottery era started in 1964 in New Hampshire because of that state’s famous anti-tax phobia. Now all but two states, Tennessee and Utah, have some form of legalized gambling. Faced with unpopular tax choices, legislators in other states have taken the gaming route.
Tennessee most likely will join the ranks of gambling states a year from now, when a constitutional amendment authorizing a state lottery is on the ballot. For more than a decade, polls have shown that roughly two-thirds of Tennesseans want a lottery.
Despite some beliefs to the contrary, the lottery won’t have much impact on the state’s budget problems. First, it will produce only about $200 million annually in taxes at a time when Tennessee stares at a billion-dollar budget shortfall. And the money is earmarked for college scholarships.
Given the legislature’s recent record of robbing Peter to pay Paul, it’s possible that lawmakers will raid higher-education funds and rationalize that the lottery tuition money will make up the difference.
The issue of tax reform has now gotten ensnarled with a constitutional convention. Many senators are insisting that an income tax must be followed or preceded by a constitutional convention on the subject, which would give voters a say in the issue.
The lottery referendum next year purports to outlaw casinos, but that could easily be undone with a convention.
There is no real reason why a convention couldn’t be authorized to consider casino gambling at the same time as taxes. It could be posed as an either/or proposition. Or gambling could be placed on the ballot as a separate issue. But it’s intriguing to ponder what Tennesseans would do if given the choice between an income tax and casinos.
Is there enough money involved for legalized gambling to make a dent in the state’s budget problems? You bet.
Casinos paid $3.5 billion in state and local taxes last year. Americans are now spending as much in casinos as they do playing golf or watching cable television. Mississippi casinos paid $320 million in taxes last year, a partial reason why that state has been able to afford a $10,000 jump in teacher salaries.
That is the direct impact. Mississippi casinos also provide 34,000 jobs and a tourism industry where there was none. Perhaps half the players in Mississippi on a given day live in Tennessee.
Then there is the matter of video poker. New technology has made the monitoring and tax collection problems easy to handle. Video poker makes little casinos out of every convenience store and bar, and some experts think it could produce $400 million annually in Tennessee.
No Tennessean is now more than three hours from a casino. Or three clicks of the mouse from a Caribbean gambling den.
The voices calling for a constitutional convention on taxes generally are those who oppose gambling most strongly — conservatives with links to fundamentalist religious groups. They can’t have it both ways.
A constitutional convention on the income tax isn’t necessary, according to many of the state’s top lawyers. Passing taxes should be a legislative responsibility.
The convention is a way to shift the burden away from the General Assembly. If the legislature begins to cede its powers to public referendum in the form of a constitutional convention, it should allow the voters to have the widest possible latitude. And that includes casinos.
Larry Daughtrey is a political writer and columnist for the Nashville Tennessean.
