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Costa first floated this proposal in co-sponsorship memoranda in January. Three other state senators answered the call:
In addition to Costa’s bill, four Republican state senators introduced companion legislation to the House of Representatives gaming reform bill earlier this month. Legislation is also expected to be introduced by Republican leadership in the PA Senate.
Most of the policies in Costa’s bill line up with the language in the other bills.
But SB 524 diverges in four key ways:
The differing views of the Pennsylvania House of Representatives and Pennsylvania Senate when it comes to setting an online gambling tax rate has been one of the key issues holding up online gambling legislation.
The House’s 14 percent tax rate lines up with legislation in other states (the New Jersey online gambling tax rate is 15 percent). Industry data also points to this rate as the ideal that allows jurisdictions to generate revenue without handcuffing the industry.
The Senate’s more ambitious tax proposals are seen as nonstarters for the industry. In addition to Costa’s newly-suggested 25 percent rate, a Senate bill from 2016 called for a 54 percent tax rate.
A compromise on the proper tax rate for online gambling and DFS will have to be found in order for online gambling and daily fantasy sports legislation to move forward. The end result has to be no higher than 20 percent.
Several industry sources I’ve spoken with have indicated that 10-15 percent is the sweet spot, while a 20 percent tax rate would likely be insurmountable. A tax rate of 25 percent or higher would kill the industry before it even got started.
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