Friday's HOT MIC

Friday's HOT MIC

Stephen, a funny story about taxing gross receipts.

A few years back, Ohio legalized casino gambling for the first time via a referendum to amend the state's Constitution. Casino industry lawyers actually wrote the text of the amendment (which is ridiculously long and looks more like a real estate deal than an amendment) and agreed to pay a commercial activity tax. However, the lawyers weren't all that precise with the language and it wasn't clear whether the tax would be on profits or gross receipts before payouts. As you can imagine, the difference between those two numbers is significant. Gov. Kasich, facing an $8 billion budget shortfall, said the CAT applied to gross receipts before payouts. The casino owners screamed and howled and threatened to walk away from the whole deal (even as the casinos were under construction). A panicked Kasich used his pen and an obscure administrative board to pretty much re-write the constitutional amendment to exempt a portion of the casinos' receipts from the CAT (other businesses still have to pay the tax on their gross receipts).

I share this story because the same kind of thing may come into play in California if they try to impose a tax on gross receipts to pay for single-payer healthcare. There are certain (very influential) industries that might have a thing or two to say about that. They'd either try to put a stop to it altogether or, more likely, demand an exemption, claiming "hardship."