Local Tax Share Issue Further Muddies The Waters For Online Gambling Legislation In Pennsylvania

On September 28, the court ruled that the local tax share payments in the Gaming Act of 2004 were unconstitutional on the grounds that they are inequitable, favoring some casinos over others.

The legislature was given just 120 days to find a fix, and with just six scheduled session days between now and the end of the year, both chambers have sprung into action.

But the fix is only one aspect of a more complex issue, with Pennsylvania online gambling at its center.

The haves and the have nots

The legislature needs to come up with a tax on the casinos that not only satisfies the court, but is acceptable to the casinos. The capability to reach such a tax compromise didn’t seem to be much of a concern at Tuesday’s hearing.

More concerning was how the funds would be distributed to local towns and counties, as witnesses and lawmakers alike questioned the current distribution of these tax dollars.

As Representative John Payne, the chairman of the House Gaming Oversight Committee, said during the hearing, “The fix won’t be the problem, it will be the distribution.”

Representatives and senators from areas that do not currently get a share of the local tax share are lobbying for a wider distribution of the tax revenue. On the flip side, lawmakers from areas that currently receive a piece of the pie are arguing that their share shouldn’t be trimmed, and in some cases that it should be increased.

In short, everyone wants more money.

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Numerous fixes on the table

The legislature can handle this in a number of ways:

1. Create a quick fix to the tax issue that satisfies the court and keeps the current distribution of the tax money temporarily in place. The legislature could come up with a permanent plan to distribute those funds at a later date.
2. Fix the tax share issue and rework the way the funds are distributed to towns and counties across the state.
3. Fix the tax issue and rework the way funds are distributed, and at the same time pass some version of the omnibus gaming reform bill which will generate new revenue for the casino industry and municipalities.

The first fix is the simplest, and given the lack of time, may be the one the legislature ultimately uses, even though it’s more or less just kicking the can down the road. If the legislature decides to deal with the local tax share independently, and decides to save the distribution of funds until next year, online gambling is far more likely to be off the table until 2017.

On the other hand, if the legislature is going to work out the distribution of the funds at this time, it’s quite plausible it will attach it to the omnibus gaming reform bill that has sat idle in the Senate since the summer.

During Tuesday’s hearing, Payne called on the Senate to amend the bill with a local tax fix and send the bill back to the House.

This would be the best solution, not only because it permanently deals with the tax share issue, but it would create new sources of revenue for the casinos, thereby making a detrimental tax change more palatable. If everyone wants more money for their municipalities it has to come from somewhere.

Furthermore, it would be good for the state’s budget, which is relying on the estimated $100 million of revenue from online gambling.

Online gambling picture could come into focus tomorrow

The House Gaming Oversight Committee will host another hearing tomorrow morning.

Tomorrow’s hearing is focused on online gambling and daily fantasy sports, and it’s expected that legislative advocates of online gambling will make the case for dealing with both gaming issues now, and not taking a piecemeal approach that could see these issues spill over into the next legislative session.