The Public Always Loses When Government Picks Winners And Losers

The inequities of the government taking tax dollars and picking winners who receive those tax dollars at the expense of everyone else has reached epidemic proportions. The Obama administration has used hundreds of billions of dollars in so-called federal stimulus spending for this purpose over the past four years. The problem, albeit on a smaller scale, is no better at the state and local level.

Corporate cronyism raised its ugly head to an unprecedented level when the Indiana Senate unveiled a plan to give up to $100 million to the Indianapolis Motor Speedway to make improvements to its privately-owned race track. Although that plan easily passed the Senate, the House raised questions about the deal. The House Ways & Means Committee Chairman Tim Brown echoed the concerns raised by this blog that the Hulman-George family may intend to sell the track and is simply using the infusion of state tax dollars to increase the selling price of the track.

Another plan working its way through the legislature would allow Indiana's two horse race tracks, which are currently allowed to operate slot machines at their tracks known as racinos, to operate full-blown casinos with live dealers and table games. Actually, some lawmakers professed shock to learn the racinos were already operating table games at their racinos electronically without live dealers despite their understanding that the legislation they approved a few years ago only permitted slot machines.

The House is now pondering a blending of the legislation sought by the IMS and the racinos, which would use revenues generated by the racinos to help pay for the IMS subsidy. House Speaker Pro Tem Eric Turner (R-Cicero) and Rep. Brown said "the changes are aimed in large part at easing concerns that the legislature is helping a private business able of taking care of itself" according to the Star's Mary Beth Schneider. How ironic Turner would share such a concern. We just learned yesterday that a business controlled by Turner's family was set to receive $375,000 in economic incentives from the state to move its headquarters within Hamilton County from Cicero to Carmel. That's the same business that was the beneficiary of $7 million in revenue bonds approved by the Indianapolis City-County Council last year to build a long-term care facility on the city's east side. The plan suggested by Brown and Turner is highly convoluted, and it's not at all clear to me that at the end of the day it still doesn't involve taxpayers being asked to foot the bill to help chosen private businesses. Here's how Schneider explains the deal:

Under the plan laid out this morning by Turner, $10 million annually from slot machine revenues at the state’s two racinos would be set aside to help motorsports. Half of the money — $5 million annually for 20 years — would be treated as an interest-free loan to the speedway, paying off bonds issued by the Indiana Finance Authority for the renovations . . .

The other $5 million annually from the slot machines would go to the Indiana Economic Development Corporation for a “motorsports development program and fund” which would make loans available to any of the other tracks or motor sports businesses in Indiana.

A new motorsports district at the Speedway would still capture any additional sales and income taxes generated beyond what already is raised within it to pay off the loan.

In addition, a new ticket fee would be added to major events at the Indianapolis Motor Speedway to help pay off its loan. Tickets costing less than $100 would have a 2 percent charge added to them; tickets of $100 to $150 would be 3 percernt more expensive; and tickets of more than $150 would have a 6 percent admissions charge. That, Turner said, is expected to raise $1 million annually.

The Speedway’s loan would remain outstanding until paid through the increases in sales and income taxes, plus the ticket fees. And if the Speedway was ever sold, the state could recoup its money then.

To sweeten the deal for racinos and win support from the 11 other casinos, SB 528 was changed to let them avoid taxes on up to $3 million in free-play coupons the first year and up to $5 million the next.

If I follow correctly, the plan is to use tax revenues generated by racinos to provide an interest-free loan of $5 million a year to pay off up to $100 million in bonds issued by the state of Indiana for use by the IMS. Another $5 million would be set aside from that same source of revenues to fund state loans offered to other motorsports-related businesses within the state. There would still be a motorsports tax district created that would capture sales and income taxes generated by the IMS to help pay off the loan. A new ticket tax will be levied on events held at the IMS that will supposedly generate $1 million annually. The IMS' loan would remain outstanding until its repaid through increased sales and income taxes, along with the new ticket tax; however, the IMS would repay the money it is loaned if the IMS is ever sold. A special tax break worth $3 million a year the first year and $5 million thereafter would be awarded to the racinos. Did you follow that? It's complicated.

A Shelbyville lawmaker where one of the racinos is located is not at all happy with the plan laid out by Brown and Turner.

“I think it’s the most egregious example of government overreach I’ve ever seen in my seven years here,” said Rep. Sean Eberhart, a Shelbyville Republican whose district includes the Indiana Grand Casino at the Indiana Downs racetrack.

“Show me another example of where we’re forcing one private industry to subsidize another private industry,” Eberhart said. “That’s exactly what we’re doing here.”

Apparently Rep. Rip Van Winkle just woke up. I've lost count of how many times government has picked winners and losers in this state just this year alone, let alone this past week. And it's only Tuesday.