An increase in the Michigan casino tax, aimed at helping to balance the state budget, has led to job losses in the greater Detroit region.
On September 16, the MGM Grand Detroit Casino announced the layoff of 150 employees “in response to the state legislature raising Detroit casino taxes by 33 percent in August.” The tax increase took effect September 1.
“The 33 percent tax increase is the only reason for the layoffs,” said Bob Berg, a spokesman for MGM Grand Detroit. “When costs suddenly go up, something has to go. The layoffs are across the board in all areas of the casino operation.”
According to the MGM Grand, more than one-half of its 2,250 employees are Detroit city residents.
The layoffs at the MGM Grand followed the August 16 layoffs of 182 workers at the Greektown (Detroit) Casino.
A third Detroit casino may be next to cut jobs because of the tax increase. Tom Shields, a spokesman for MotorCity Casino, said the operation “is still studying the job cut issue,” according to a story in the September 16 Detroit News.
City, State to Split Taxes
The tax increase will boost Detroit casino taxes from 18 to 24 percent of all gambling revenues, to be collected on the amounts generated after winnings are paid out. The estimated $75 million in new taxes generated would be divided between the city and the state, with $50 million going to the state of Michigan and $25 million to the city of Detroit.
The Detroit News tried but failed to contact several government officials for their response to the MGM announcement.
“Liz Boyd, a spokeswoman for Gov. Jennifer Granholm, had no comment on the MGM layoffs,” and a “spokesman for Detroit Mayor Kwame Kilpatrick did not return a telephone call seeking comment,” according to published reports.
Budget Challenge Remains
On September 2, Granholm (D) and state legislative leaders agreed on a state budget that calls for tax hikes and spending cuts. The $300 million in spending cuts was trumped by $363 million in tax hikes–including a 75 cents increase in the tax on each pack of cigarettes and the one-third boost in the Detroit casino tax. Even with lower spending and higher taxes, the budget remains in deficit.
The Mackinac Center for Public Policy noted on its Web site, on September 8, “Michigan state government is entering a third year in which revenues are projected to be less than the amount expected when spending plans were made. This time the shortfall is some $900 million and political leaders of both parties are saying ‘everything is on the table,’ including possible tax hikes, or postponement of programmed cuts. While total state spending currently comes to around $38.5 billion, lawmakers have direct control of only $20 billion, out of which they must come up with necessary budget changes.”
The Mackinac Center offered detailed recommendations for state budget reform in a major report, “Recommendations to Strengthen Civil Society and Balance Michigan’s State Budget.” Among the study’s recommendations:
- sell unproductive state assets and real estate;
- redirect state tobacco lawsuit monies to the general fund;
- eliminate counterproductive economic development programs; and
- end nonessential state programs.
John W. Skorburg ([email protected]) is associate editor of Budget & Tax News.
For more information …
“Recommendations to Strengthen Civil Society and Balance Michigan’s State Budget,” issued May 4, 2004, is available on the Web site of the Mackinac Center for Public Policy at http://www.mackinac.org/article.asp?ID=6545.
