The Mankato City Council rejected a planned change in its charitable gambling tax rules on Monday night. The local youth hockey association and a veteran’s organizations that strongly opposed the change influenced the decision.
What did the city plan?
Pat Hentges, the City Manager, presented a new 2020 budget that would include a 10% tax on charitable gambling events and pulltab sales. The city’s eight nonprofit organizations depend on this revenue and paid a 3% tax on gross revenues earlier. Hentges’ new policy would have taken away a major portion of the largest source of its revenue.
The tax regime, which included a small percentage imposed on gross proceeds and a larger tax on revenue after expenses, would have only generated $100,000 every year. The city offered to cut the tax in half but decided after six weeks of debate that it doesn’t seek to impose the new rules. However, despite generating only a small amount of taxes, the new taxation policy could have helped the city to expand its scope of activities.
For instance, with a 3% tax, the city could only spend on Mankato police to provide gambling enforcement and overseeing. With a larger tax rate, the city could have initiated youth, cultural and social activities.
The other side of the argument
The issue was not just centered on Mankato’s 3x rise on taxes and how it could have eaten into the revenues of charitable organizations. We must note that the Minnesota Gambling Control Board has rejected all gambling enforcement spending by the city in the past few years. Because of this, the city had to refund a large portion of the 3% tax is levied on the nonprofits. In the last seven years, it has reimbursed over $253,000 of tax proceeds to local charities.
In light of this situation, a new 10% tax doesn’t sound reasonable. The Mankato Area Hockey Association and veterans’ organization VFW argued that the city is looking at pure money grab from local charities. City officials proposed a 5.5% tax later, but this too was rejected after the two organizations rejected the offer voted against it 4-3. Council members Jessica Hatanpa, Mike Laven, Dennis Dieken, and Mark Frost voted in favor of maintaining the status quo. Mayor Najwa Massad and council members Jenn Melby-Kelley and Karen Foreman voted for the new tax.
Though future refunds of tax payments are not guaranteed, charities would be better off with a 3% tax than a 10% tax.