View: Allocate Portion Of PA Online Gambling Revenue Toward Local Tax Share

View: The Best Fix For Pennsylvania’s Local Casino Tax Crisis Includes Legalizing Online Gambling

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Pennsylvania is currently looking at a patchwork quilt of gaming reforms, many of which share little commonality.

At the forefront of the conversation are online gambling, and the need to fix the local tax share language in the Gaming Act of 2004.

The local tax share fix could be handled as an independent issue, but it’s beginning to look like it will become the bargaining chip that gets online gambling, and perhaps a few other gaming reforms, across the finish line this year.

Here’s why that may be the best answer.

How we got here

In July, the House of Representatives passed an omnibus gaming reform, HB 2150. Shortly thereafter, Governor Tom Wolf earmarked $100 million for gaming expansion as part of a budget deal. The state is relying on that revenue to fulfill a shortfall.

Despite this, the Senate lacked any real sense of urgency regarding online gambling, at least up until recently.

In late September, the state Supreme Court ruled the local tax share paid by some of the state’s casinos unconstitutional, and gave the legislature a 120-day window to take care of it.

In actuality, the timeframe is even tighter. As it stands right now, the Senate will only meet four more days before shutting the door on the 2016 session — from October 24 – 26, and one day in November.

Why online gambling fits with a local tax share resolution

Imagine you’re a Pennsylvania lawmaker, and there isn’t a casino in your county. However, your district is surrounded on three of its four sides by counties with casinos, all of which benefit from the local tax share, with several million dollars flowing into their coffers each year.

In this scenario, your primary goal isn’t to reinstate the local tax share, as you and your constituents receive no benefit from it. Instead, it’s to revisit the way taxes are distributed throughout the state and see if you can get some of those tax dollars to trickle into your county.

In effect, you’re arguing that not only does the language need to be fixed, but the original distribution method devised back in 2004 is unfair, and your county is deserving of some of the money. Your goal is to convince your colleagues to change the way the $141 million is distributed.

Where things get complicated is when you try to figure out from where the new slices of the money pie are going to come.

There are basically two options:

  1. The other counties could take a smaller slice.
  2. The size of the pie could be increased by upping the payment casinos are asked to make.

Now, imagine you’re a lawmaker in one of the counties that currently receives, and is counting on, some of the local taxes casinos pay. You definitely don’t want to lose any of the tax money you get, but at the same time you realize your colleagues whose districts don’t currently receive any of this money hold all the cards. You’re under the gun to get the local tax share reinstated before it expires; they’re not.

If you fall into the latter group you’re stuck between a rock and a hard place.

  • You can’t shrink your piece of the pie, especially since it’s already been allocated this year. Any cuts to the amount your constituents receive would lead to local services being cut. This is simply not an option.
  • On the other hand, the alternative isn’t much better. If you support raising the amount casinos in your district are currently paying, they’re not going to be happy, and casinos are among the biggest employers in the state.
  • The third option could very well be the worst. If you take a hard-line stance against the lawmakers calling on the state to widen the distribution net of tax money, you run the risk that they’ll take the same hard-line approach but without the consequences that you’ll face if you fail to get the tax share reinstated. Your local towns and county will get nothing, and you’ll be blamed.

The solution requires some politicking and maneuvering.

The answer is to slightly increase the tax rate on casinos (likely from a flat fee or a uniform tax rate applied to all casinos), but at the same time, throw them a bone that will more than offset this tax increase. For instance, a new revenue stream.

Enter online gambling and perhaps some of the other gaming reforms contained in HB 2150. A small portion of the $100 million expected from online gambling could be reallocated toward the local tax share.

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Are the wheels already in motion?

Last week, Pennsylvania Senator Kim Ward told the Times-Tribune that she “wants to see additional municipalities become eligible for local share money if new sources of gambling revenue are agreed upon.”

Of note, Ward chairs the Senate Community, Economic and Recreational Development Committee (CERD), which, “voted to position a gambling-related bill as a vehicle to move any agreement through the remaining voting days of the legislative session,” per the Times-Tribune.

If the Senate and the House can reach an agreement, the bill could be amended and voted on as soon as this week.

During hearings held last week (one on the local tax share and one on online gambling and daily fantasy sports) in the House Gaming Oversight Committee, multiple lawmakers broached dealing with online gambling and the local tax share simultaneously, in a way that would appease all interests.

This included Chairman John Payne, who was the architect and driving force behind the gaming reform bill the House passed in July.

- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.
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