Members and Associates, 02/20/2015
Please see the attached information sheets from the Gambling Control Board. Director Barrett presented these at the Gambling Control monthly meeting on Tuesday, February 17 and Wednesday, February 18 to the House State Government Finance Committee when he presented his case for the 50% increase in our regulatory fee.
I have expressed my disappointment to Director Barrett in regards to these charts and that in my opinion he is clouding the issue of what we really pay in taxes by speaking of our tax liability as a percent of our overall dollar sales. While it is true that we had $1.2 billion dollars in sales last fiscal year, we paid back $1 billion of that in the form of prizes to our patrons in our communities before our patrons ever left the establishment. That means that the money that we actually got to bring to the bank, got to pay bills, taxes and missions with was just over $200 million.
One of my proudest accomplishments to date as executive director of Allied Charities is when ACM sat with the Minnesota Department of Revenue and came to an agreement that we could say that we paid an overall average tax rate of 20% in state tax. MN DOR also committed to corroborate that number.
Telling people that charities pay between 0% in taxes at the low end and 6.5% in taxes at the upper limit leads people not familiar with us to a false impression. It feeds the belief that we are not managing our business in a fiscally responsible manner and that we are less than forthcoming in regards to our financial worth and missions. It leads people to question why we don't actually pay more in taxes.
Telling people that we only pay 4.5 cents of every dollar that we touch towards missions is again misleading and gives people the impression that we are becoming wealthy at the expense of our patrons and our missions.
The stark reality in our business is that on average it takes almost six dollars in sales ($5.78) to get one dollar to take to the bank to pay bills, taxes and contribute to missions. Of that one dollar we take to the bank, we average 52 cents in expenses (rent, leases, games, payroll, etc.), we average 20 cents in taxes to the state of MN (more if you are paying federal and city taxes), which leaves us with at most 28 cents for missions.
Director Barrett has also stated that charities have $1.2 billion at our disposal for use as we see fit, that paying out prizes of 83% of what we take in is our choice, not a mandate. It is totally true that we can manage our payout to a degree, but it is unclear as to what would happen to our business if we chose to lower our traditional prize payout and keep a larger share of the $1.2 billion. We do, however, have another measure to look at.
The MN Lottery pays out 61.7% of their total sales of $531 million (per MN Lottery 2014 annual report) in the form of prizes. If we went to their payout structure it would follow that our business would decrease by over 50% overnight. That would not be in the best interest of either the state of Minnesota or Minnesota gaming charities.
The issue of our lack of support for the GCB monthly regulatory fee increase has also come up in conversation with the director and at the Board meeting. We have not closed the door on a discussion of what kind of an increase is appropriate, in any, and have even offered to sit down with him and begin a discussion on this budget issue. To date the director has not taken advantage of our offer other than to ask us to send him our ideas.
It was mentioned publicly at the GCB board meeting that if we do not agree to the 50% increase that we may be subject to being transferred to another arm of government for oversight. I have been told that the Department of Public Safety or the MN State Lottery are two of the options available to Governor Dayton. This is not the first time we have heard this not so veiled threat.
As your representatives at the Legislature, ACM will not be influenced by a state agency to change our determination to represent the interests of charities first and foremost.
I urge you to contact your state senator and representative to let them know just how much you pay in taxes and how it affects your mission work in your community.
Legislators set tax policy for the state of Minnesota, not anyone else. In the past ACM has asked the GCB to help us work towards tax relief for charities. We were told time and time again that tax issues were not in the GCB's area of responsibility. I am not clear as to what has changed, but it appears that it is now in their area of responsibility and they are weighing in against our interests.
Bill Update: Our policy house bill HF374 (last year’s vetoed bill) is on the floor. The senate companion bill SF229 is up in the tax committee next Monday, February 23. Our tax bill is ready and authors are signing on. We should have bill numbers for that legislation next week.
Please make those legislative contacts. You can find out who represents you at http://www.leg.state.mn.us/leg/districtfinder.aspx
Thank you for helping us out at the capitol!!