No one likes the tax that bites them.
So it is that when Gov. Peter Shumlin proposed in his budget address putting a 10 percent tax on break-open tickets, those few who knew what he was talking about immediately got their dander up and have been railing about it for the past two weeks.
At least now most Vermonters know what the tax would target and why — but we’re all just learning the full consequence.
What we’ve learned is that the break-open tickets are not just gambling as entertainment, but also a prime source of revenue for the non-profit clubs that sell them, as well as the for-profit bars. Out of a box of 2,800 tickets, the local club makes about $600 — it’s not uncommon for popular clubs to sell one or two boxes per week. At up to $1,200 per week, that’s not an insignificant annual sum for a non-profit organization that uses the money to give back to the community.
Furthermore, the tax is being placed on the total ticket sales, not on the net gain on those sales. The administration has estimated that the 10 percent tax on the sales would yield $17 million, or more — but because that is on total sales and not net revenue, the impact on the bottom line of a club could be much greater than a 10 percent hit. Learning what percentage the tax amount would be of the charitable donations is critical to understanding the negative impact the tax might have.
Ticket agents also think the administration’s numbers are far too optimistic. According to a story in the Sunday Burlington Free Press, Jeff Temer, owner of BBS Gaming in Colchester, which is the largest of seven ticket distributors in Vermont, estimates that the total statewide ticket sales come in closer to $95 million, rather than the $170 million estimated by the state. Temer estimated the tax, as currently devised, would reduce ticket sales by 30 percent, leaving a take of only $7 million annually to the state.
That potentially cuts into any progressive legislation the governor had hoped to implement and fund with this new tax — and is one reason not to tie the proceeds of funds to any specific program.
One additional glitch is that the tax, as apparently crafted, would add a dime to the $1.00 tickets at the point of purchase, rather than, for instance, on the bulk transaction between the ticket distributor and the sales agent, as the governor says he understood. That would make the sale of the tickets awkward and could drive down ticket sales. Such details could and should be ironed out as the proposal wends its way through the legislative process.
Even with those details to fix, $7 million is nothing to dismiss lightly.
The state needs money to run necessary programs, and Vermonters — all of us — need to embrace that reality. If the state is to fund education, pave state highways, fix bridges, pay the state police, support tourism and economic development, run Medicaid, promote renewable energy programs, provide heating oil assistance and nutritional aid programs, as well as a host of other vitally important programs, the state needs to find new sources of revenue or increase broad-based taxes.
The appeal of taxing break-open tickets is that it targets revenue that is currently not monitored well, is disposable income to those spending it, and is a tax that could increase the amount given to charities — not decrease it, as some critics have suggested. While no one is alleging widespread abuse of the funds generated through break-open tickets, particularly through non-profit clubs, it does make good sense to track the money raised from all sources to be sure it goes to the charitable causes patrons expect. Who can deny the sense in that?
And despite all the cries that it is another tax on the poor and middle class, it is taxing a revenue stream — gambling — that is completely disposable. Using $7 million or $17 million — or whatever the number may be — of that income to fund needed programs to make the state stronger and more environmentally fit, makes good common sense.
Angelo S. Lynn