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Released May 6, 2004

GAMING STUDY FINDS POTENTIAL INCREASE IN CASINO REVENUE TAX
COUNTERPRODUCTIVE TO STATE ECONOMY

LONG BEACH, Miss. -- As Mississippi's economy continues to recover from the recent recession, any increase in the gross gaming tax that casinos pay on revenue would likely be counterproductive, says a University of Southern Mississippi researcher who recently completed her third study of the state's gaming industry.

The study -- "Gaming Taxes and Their Impacts on Mississippi -- released March 1 by Dr. Denise von Herrmann, associate professor of political science, shows that attempts to generate new revenues by raising these taxes would likely result in the closure of up to six casino properties statewide.

Dr. von Herrmann says that her study's projections indicate that casino closures would result in the direct loss of about 4,600 casino jobs. In turn, this would cause indirect job losses in other industries as casino employees are laid off and closed casino firms cease to purchase goods and services.

"Our numbers show that a three percentage point increase might initially net the state somewhere between $4 and $68 million. But much would be offset by losses in income tax revenues, sales taxes and related revenues. Any increase in the taxes that casinos pay could ultimately mean that the state gains very little by doing this," said von Herrmann.

Mississippi currently collects a 12 percent tax on gross gaming revenues. The state's lawmakers have considered raising the tax, as have some other states with casino gaming.

The 2004 study was commissioned by the Mississippi Gulf Coast Economic Development Council (MGCEDC) and is an expansion and update of von Herrmann's previous studies in 2000 and 2002. The current study used both primary and secondary research, making extensive use of the original data collected for previous studies and was conducted between November 2003 and March 2004. Researchers from the Center for Tourism and Economic Development (CENTED), based in the university's College of Business and Economic Development, also assisted.

"We think the study is very timely in light of what other jurisdictions will be looking at doing. We want legislators to have current research and information. If the Legislature is going to be making decisions, we want them to have all the facts available," said Chevis Swetman, president of the MGCEDC.

Among the study's other findings:

• In-casino patron surveys reveal a mature, stable gaming market in which the vast majority of patron visits to casinos are planned. "The gaming market is definitely mature in Mississippi. It's not growing rapidly any more," said von Herrmann.

• At present, 42.8 percent of gaming taxes paid in the state comes from Mississippi residents. Approximately $96 million of the direct gaming tax is paid by Mississippi residents who patronize casinos, while the remaining $224 million or so is paid by nonresidents. Dr. von Herrmann said this may mean that the same number of people are going more frequently or more Mississippi residents are patronizing casinos.

• Overall, 88 percent of Mississippi casino employees are state residents. "What's somewhat surprising, and now we have evidence that, more than 40 percent of those surveyed said they came to Mississippi to work in the casino industry," said von Herrmann. Collectively, casino employees in the state paid some $42 million in direct income taxes. Data was collected from 258 employees at nine casino properties on the Gulf Coast and in Tunica County.

• Financially, casinos look healthier and slightly more profitable than two years ago at the time of the previous study. "That is surprising in some ways because of the state of the economy during that time," said von Herrmann. "Previous studies showed that Las Vegas casinos came out of the last Nevada recession faster than other businesses. Our study showed that the same thing happened this time in Mississippi."

The long-term value of this type of study is that the industry is changing over time. "We can't assume that what we found will be the same in the future," said von Herrmann.

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May 14, 2004 11:23 AM

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