Beginning next week, Pennsylvania casinos will pay a bit higher tax on all table game revenue for the foreseeable future.
The two percent tax hike on all table game revenue was approved by the state legislature, and will bring the tax rate on table games up from 14 percent to 16 percent. The state’s casinos currently pay a whopping 54 percent tax rate on slot machines, making Pennsylvania’s casinos the highest taxed in the country.
The tax increase on table games is expected to generate an additional $17 million annually for the state. However, it’s important to note the tax increase is set to expire in January 2019 unless it is reauthorized by the legislature.
Needless to say, the casino industry was opposed to the proposal.
“We spent a lot of time fighting some of the other stuff; this one sort of came out of nowhere,” said Sands CEO Mark Juliano on The Morning Call. “We’re not happy about it, but it doesn’t stop us in our tracks. [Pennsylvania] is already the highest tax environment for casinos, but we’ll deal with it.”
Others see the tax increase more as a tit-for-tat compromise, with the state getting a slightly bigger cut of the casinos’ table game revenue, and in exchange the casino industry gets to expand into online gambling and daily fantasy sports.
“Certainly with any tax increase there is a balance between good effective government and a business’ ability to provide a quality product and stimulate the economy through job creation,” said Mohegan Tribal Gaming Authority President Bobby Soper on The Morning Call.
“If the balance tips too far, it is not good for anyone. We clearly are watching the other issues very closely and believe that online and [daily fantasy sports] are part of a comprehensive product offering.”
The table game tax increase occurred as online gambling supporters patiently wait for the Pennsylvania legislature to return to Harrisburg this fall and put the finishing touches on an omnibus gaming reform bill that has online gambling legalization as its centerpiece.
The state is counting on the money the gaming reforms are expected to generate to fund the recently-agreed-to budget.
The money generated from the table game tax bill will also be used to help fund the state’s proposed $31.6 billion budget, but is a far cry from the $100 million in gaming revenue the state is banking on from online gambling and several other reforms to balance the budget.
Since the tax increase wasn’t included in the omnibus package passed by the Pennsylvania House of Representatives, passage of the tax increase bill could be a sign that some element of the gaming reform package will be stricken out.
There are several controversial pieces, including but not limited to online gambling, which has two high-profile detractors in Sands Bethlehem Casino and Parx Casino.
That being said, the numbers don’t match up for the tax increase to supplant online gambling, which is being talked about almost as if it’s a piece of must-pass legislation at this point.
At $17 million, the tax increase can’t hold a stick to the $50 million-plus online gambling would generate in licensing fees in its first year, nor can it compete with the $100 million the industry is expected to generate annually when it’s up and running.
The tax increase in and of itself is simply not enough to eliminate the keystone piece of that legislation, online gambling, despite the protestations of Parx and Sands.
More likely, the tax increase would lead to the elimination of slot machines at airports and/or off-track-betting parlors, another somewhat controversial part of the gaming reform package, that’s revenue potential is more of an unknown.
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