Why doesn’t Washington tax tribal casinos?

An idea I’ve heard thrown around a few times when folks talk about government reform is that the state should tax tribes that operate casinos. So why doesn’t Washington do this? Well, there are two main reasons: tribal sovereignty/federal law and Washington’s past opposition to the expansion of gambling.

As Catherine mentioned in her post on tribal fuel tax agreements, there are 29 federally recognized tribes that are independent nations within Washington State. The federal government has a trust relationship with the tribes, usually established by treaties, that falls outside of the federal framework that connects the 50 states. This has been an emotional issue since our nation’s founding, and to say that this creates a complex system would be an understatement.  However, it does mean that the states cannot tax tribes since it’s not allowed under federal law.

However, in certain instances, tribal gaming money can be given to states. This is called revenue sharing. Here’s a quick description from Marty Brown, the Director of the Office of Financial Management:

The federal government closely scrutinizes any compact that provides for revenue sharing to ensure a tribe receives something of equal benefit in return. In most states, no other entities are allowed to offer gaming in exchange for revenue sharing. In our state, non-tribal card rooms do offer gaming.

The compact that Marty references is a gaming agreement that the Washington State Gambling Commission negotiates with individual tribes that is then sent to the Secretary of the Interior for approval.  These compacts outline types of gambling, number of slot machines, gaming facilities, etc. that a tribe can operate.

Since the state has some non-tribal gaming, tribes couldn’t be given a monopoly on gambling establishments in Washington.  The only other way to make revenue sharing a reality in Washington would be to allow tribes to greatly expand their gambling operations, an idea that voters and elected officials aren’t thrilled about.  Looking at past initiatives related to gambling, five out of seven have failed. The most recent example is Initiative 892, which would have authorized additional "electronic scratch ticket machines" in non-tribal gaming establishments. Gambling revenues collected from this expansion would have been used to help offset property taxes.  Voters didn’t like this idea and the measure was defeated by a margin of 2 to 1.

Based on all of this, it’s highly unlikely that revenue sharing will occur in Washington anytime soon. While the money from gambling would be a boost to state and local coffers, it’s better if Washington doesn’t go down that road. As previously mentioned, Washington’s tax structure is very regressive and paying for services has been challenging during economic downturns.  Gambling is a recreational activity that people do less of when times are tough. Depending on this revenue source would only contribute to the shortfalls that Washington experiences when the economy takes a turn for the worst.