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A new bill submitted to the Iowa legislature’s House would lower the state’s casino gaming tax from 22% to 19% by 2027.
Lawmakers have said the motivation behind the proposed tax-rate cut is to keep Iowa’s 19 casinos competitive.
How the Iowa casino gaming tax cut would work
The Hawkeye State’s current law about casino tax rates allows the state to tax casinos that generate at least $3 million in gaming revenue in any given year. That tax rate applies to casinos, gambling boats and racinos.
The tax-rate reduction would be based on fiscal years, which begin on July 1:
- FY 2024-2025: 21%
- FY 2025-2026: 20%
- FY 2026-2027: 19%
The tax cuts would reduce the current rate by 13.6%.
The only exception to the rule applies to certain racinos in the same county as a casino or gambling boat. For those properties, the tax rate would go up from 22% to 24% starting July 1, then would drop by one percentage point per fiscal year until it hits 21% in 2027.
Why Iowa casinos and lawmakers want a tax cut
At first glance, cutting casino taxes would seem like something that could hurt Iowa. Casinos generated $1.75 billion in adjusted gross revenue in fiscal year 2023, which meant $355.6 million in taxes for Iowa, according to data from the Iowa Racing and Gaming Commission and the Iowa legislature.
Based on Iowa’s FY 2023 revenue, a tax cut of three percentage points would cost the state $52.5 million in revenue.
However, lawmakers and casinos believe that state revenue loss is worth it. Why? Competition. Neighboring states Nebraska and Illinois are growing their gaming industry. Their tax rates are lower than Iowa’s, too.
According to the American Gaming Association, Illinois charges a 15% rate on casinos with up to $25 million in annual gross revenue. And 20% for casinos with annual gross revenue above $25 million. Nebraska charges a 20% tax on gross revenue at racinos.
Compared to casinos and racinos in Iowa, properties in Nebraska and Illinois have more revenue to spend on upgrades to their facilities, marketing, and staff.
Lawmakers and casino advocates believe Iowa’s gaming properties are suffering because of the disparity in tax rates. During a House discussion about the bill, a Caesars Entertainment rep said that casino growth north of the border in Omaha will put a “tremendous amount of pressure” on Iowa casinos, Iowa Capital Dispatch reported.
Cutting Iowa casino taxes could be hard to pass
A tax cut typically has two sides: those who get money and those who lose it. If the proposed casino tax cut bill becomes law, multiple state programs would lose money.
In FY 2023, more than 54% of casino tax revenue went to the state’s Rebuild Iowa Infrastructure Fund. That fund provides money for roads, airports and multiple other key infrastructure areas.
Other initiatives that would be impacted by a casino revenue tax cut would include job creation, water quality, gaming enforcement, and county-level programs.
If the bill continues to move through the Iowa legislature, expect pushback from programs impacted by the tax cuts.
In other news, lawmakers have submitted legislation pushing for legal online casinos in Iowa. You can keep track of this with our 2024 casino bill tracker.
