Buses once crowded the highways to Atlantic City, bringing millions of jackpot-hungry customers to the casinos.

Partly by design and partly due to circumstances, however, the number of Atlantic City-bound buses has plummeted since peaking in the late 1980s.

Casino bus passengers used to represent close to half of Atlantic City’s annual visitors. However, bus traffic has plunged since peaking at 14.2 million passengers in 1988. In 2011, there were just 3.2 million casino bus passengers, only 11 percent of the city’s total of 28.4 million visitor trips, figures compiled by the South Jersey Transportation Authority show.

Although the fragile economy and competition from casinos in surrounding states have been factors, the downward trend also reflects a different relationship between casinos and the bus companies. Some casinos don’t even have bus programs.

After years of debate, lawmakers hope to reverse that trend through legislation that would exempt out-of-state bus companies from New Jersey’s corporation business tax. Proponents of the bill stressed that the entire state would enjoy a boost in tourism if the proposal becomes law.

The tax is a levy on the income that most for-profit corporations receive in the state. Firms typically pay 6.5 percent, 7.5 percent or 9 percent of their net in-state income, or at least $500 to $2,000, depending on their gross receipts. The tax dates to 1884, when the state first assessed a franchise tax on all in-state corporations.

It is now state government’s third-largest source of revenue, behind income and sales taxes. Law changes have generally increased the amount of money raised, from $1.3 billion by June 2001 to $2.2 billion by June 2011. But because it is tied to economic activity, it rises and falls with the economy. Between June 2008 and June 2010, the tax’s revenue fell from $3 billion to $2 billion, a stunning collapse of a third, but the state nonpartisan Office of Legislative Services expected the tax to raise $2.6 billion by June 2013.

“I think it’s a very important piece of the whole puzzle, not just for Atlantic City but for tourism in New Jersey in general,” said state Assemblyman Matthew Milam, D-Cape May, Cumberland, Atlantic, one of the bus bill’s primary sponsors.

The legislation, which was approved 79-0 by the Assembly in late June, has been referred to the Senate Transportation Committee. Milam said he hoped the bill would be fast-tracked when the Legislature reconvenes this month following its summer recess.

Under the bill, out-of-state bus companies that do nothing more than carry passengers into New Jersey would not have to pay New Jersey corporate business taxes. Lawmakers say New Jersey would more than make up for the loss of corporate tax revenue through increased spending by bus passengers.

However, the state Office of Legislative Services’ analysis of the bill showed it would cost the state between $150,000 and $750,000 per year in lost revenue, analyst Thomas Koenig wrote. Whatever gain would probably be less than the state’s revenue loss, he wrote, because the bill would extend the tax break to bus tours that would have been made anyway.

Koenig added he did not believe the bill would significantly change the prevailing dynamics of decreased bus travel, including a weak economy, decreased consumer spending, Pennsylvania competition or the casinos’ shift of focus to overnight patrons.

“The loss of tax revenues resulting from this bill would be offset by the sales and use tax and the casino revenue tax generated by tour bus visitors who spend money in this state,” said Assemblyman Nelson Albano, D-Cape May, Cumberland, Atlantic, another chief sponsor of the legislation.

Albano said tour bus operators have either threatened to stop service to New Jersey or have halted it all together because of the corporate business tax. Bus operators complain that the tax adds to their costs and gives them an even greater incentive to serve other states that do not have a similar tax.

“We certainly do not want any deterrents for companies wanting to bring visitors to Atlantic City and other destinations,” said Andrea Malamut, executive director of the Greater New Jersey Motorcoach Association, a trade group that also represents bus companies in Pennsylvania, New York, Maryland and New England.

Diane Wieland, tourism director for Cape May County, said the bus-tax issue has been debated for years. In the meantime, she said, tourist-dependent businesses such as hotels and restaurants have suffered from the decline in Cape May County bus traffic.

“Because of the weak economy, we need the bus traffic here,” Wieland said. “It’s especially important in the off-season. We can bring in tours for birding in the fall and other eco-tours. It’s good for midweek business, too.”

Wieland said the tax is a huge disincentive for tour bus operators to come to New Jersey.

“They can take buses to Pennsylvania and not have to pay, but they have to pay to come to New Jersey,” she said. “I think the bus companies are not inclined to develop trips to this area because of the tax.”

Malamut said the political climate finally appears right in New Jersey to lift the tax. She warned that if New Jersey does not, bus operators will have no choice but to detour to other markets.

“The motorcoach industry brings a lot of visitors to a number of destinations, chiefly Atlantic City. But with the proliferation of gaming throughout the region and country, out-of-state bus carriers are looking to go where they are welcomed with open arms,” Malamut said.

In recent years, Atlantic City casinos have shunned the low-rolling bus passengers in favor of the more lucrative customers who arrive by car and stay overnight. A new, casino-funded $20 million advertising campaign built around the slogan “Do AC” aims to shed the city’s old bus-and-buffet image to create a more upscale tourist atmosphere.

However, one casino relishes the thought of more buses coming to Atlantic City. The Atlantic Club Casino Hotel, formerly known as the Atlantic City Hilton Casino Resort, wants to cater to more bus patrons as part of its rebranding into a low-cost casino, its management says.

Michael Frawley, chief operating officer of the Atlantic Club, said bus patrons fit in with his casino’s strategy to attract customers from local feeder markets, about 30 to 35 miles from Atlantic City.

“We’re trying to build our bus business back up. We’re succeeding, but we would like it to be better,” Frawley said. “Our bus passenger is very important.”

Frawley maintained that all of Atlantic City should be similarly receptive to bus customers.

“Any traffic that comes to town to see us is a benefit,” he said.

Staff Writer Derek Harper contributed to this report.

Contact Donald Wittkowski:

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