Taxing Times

The cover story in the Dec. 19 issue of Newsweek magazine examines what it calls "Bush's World," suggesting the 43rd president of the United States lives in a bubble of isolation.

However, George W. Bush's younger brother, Jeb, the governor of Florida, may be the one living in the type of world Newsweek accuses the president of occupying.

On Dec. 9, Jeb Bush said he reluctantly would sign legislation authorizing slot machines at four Broward County pari-mutuel operations, including Gulfstream Park in Hallandale. The gambling machines were approved by a 57-43 margin of Broward County voters in a referendum in March.

"It's not going to feel good," the Florida governor was quoted as saying. "I just don't think this is right for our state...The fact that there's going to be a bunch of slot machines in Broward County doesn't warm my heart."

Perhaps Gov. Bush hasn't heard of the casino ships and their "cruises to nowhere" that pack in a thousand slots players at a time and depart from Broward County's Port Everglades every day. He also may not know about the Seminole Indians' Hard Rock Hotel, complete with a 130,000-square-foot casino, nestled between the Florida Turnpike and Interstate 95 smack in the heart of Broward County. The Hard Rock claims to have "2,100 of the hottest gaming machines on the planet"--though they fall just short of calling them slot machines.

Gov. Bush may be unaware of those operations because they do not bring revenue to the state from gambling. The cruise ships go three miles out into the Atlantic Ocean, into international waters, and pay the state nothing. The Seminoles, an aggressive and litigious group that in 1979 became the first Native American tribe to offer high-stakes gambling, don't pay taxes to the state because of their sovereign nation status. Including a Hard Rock Hotel and Casino in Tampa, the Seminoles operate five other casinos in Florida, all of which now are entitled to expand into full-fledged slot machine parlors as a result of the Broward County vote.

But there's a rub.

While Gulfstream Park, the Hollywood Greyhound track, Pompano harness raceway, and the Dania Jai-Alai fronton will pay a 50% tax on slots earnings, the Seminoles may end up paying nothing, depending on what kind of deal they negotiate with Gov. Bush. That possible scenario will not create a level playing field.

Even without competition from the cruise ships and Seminoles, pari-mutuel operators in Broward County are saddled with a tax burden far higher than the slots tax in Delaware, Iowa, Louisiana, New Mexico, Pennsylvania, and West Virginia. The only Thoroughbred racing state with a higher tax on slot machines is New York, where a combined 71% of revenue is earmarked for the state and lottery division. It's no wonder the Aqueduct parlor approved way back in October 2001 hasn't collected its first tax dollar.

Frank Stronach's Magna Entertainment has invested more than $325 million in South Florida racing--the $87-million purchase of Gulfstream Park, $69-million development of the Palm Meadows training center, and the $171-million reconstruction of Gulfstream scheduled to be completed in 2006.

That investment is hard to justify now. The state's 50% tax on slot machines puts Gulfstream and Broward County's three other pari-mutuel operations at a serious disadvantage with the Seminole tribe and casino cruise ships.

To his credit, Stronach has attempted to develop Gulfstream into a first-class facility that rivals a Las Vegas casino property--but one whose primary focus will be on horse racing. Racing is a big part of Florida's $5.1-billion horse industry, which provides 38,300 full-time jobs, according to a recent American Horse Council economic survey.

Surely, Gov. Bush knows the significance of Florida's horse industry. It's puzzling why he is unwilling to support it.