Internet poker supporters are lamenting the Congressional Supercommittee’s failure to agree on a deal to cut the budget deficit by $1.2 trillion over the next decade.
Many speculated a bill calling for federal legalization, regulation and taxation of online poker was going to be part of the solution.
Deutsche Bank gaming analyst Andrew Zarnett speculated the failure to come up with a solution could have a negative impact on the casino industry.
In a research note, Zarnett said several tax programs could expire at the end of the year, including payroll tax cuts, which he said could be “a material negative for consumer discretionary spending.”
In 2010, Congress also passed a payroll tax cut by 2 percentage points to 4.2 percent, which ends Jan. 1. Payroll taxes would increase back to 6.2 percent, which Zarnett said translates to approximately $1,400 of lesser discretionary dollars for individuals and families who earn annual income of $100,000.
“We believe the end of this tax holiday would have a material negative impact on discretionary spending and on the casino industry,” Zarnett told investors. “An increase in payroll taxes would also increase the wedge between what it costs companies to hire an employee and the employees after tax pay, hence adding pressure on hiring and unemployment.”
As it relates to the casino business, Zarnett said the net effect of a tax increase impacts what gamblers would spend on the casino floor.
“Consumers will reduce discretionary spending as they will have fewer discretionary dollars after the tax increase,” Zarnett said. “Historically, we have seen that destination gaming is extremely discretionary and highly vulnerable to negative stimuli; regional gamers much less so.”