Pennsylvania’s sports betting industry is less than two weeks old, but some lawmakers are already eyeing changes to where the tax revenue will go.
Under a bill filed late last month in the Pennsylvania General Assembly, tax revenue from sports betting operators will go to the state’s Property Tax Relief Fund, as opposed to the General Fund. The proposal to tweak the omnibus gambling expansion law passed in late 2017 was announced in July, but the legislation, House Bill 2749, took several months to come to fruition.
The legislation, introduced by Rep. Tina Davis, a Democrat from Bucks County, currently sits with the House Gaming Oversight Committee. The bill has 10 co-sponsors, all Democrats. The one-page measure would take effect 60 days after becoming law.
“Pennsylvania homeowners continue to face rising property taxes,” Davis said in a memo. “Seniors on fixed incomes are especially challenged by this issue, particularly those who struggle to pay for food and medications and still be able to afford to keep their homes. Given this difficult and challenging situation, it is incumbent upon us as concerned public officials to do everything we can to help provide much-needed property tax relief to our citizens.”
What does the bill do exactly?
Davis’ legislation would amend Act 42 of 2017 (the law that authorized sports betting) so that taxes on sports wagering net revenues would go directly to the Property Tax Relief Fund. The state collects 34% of sports betting revenue, all of which would go to the aforementioned fund.
There’s an additional 2% tax on sports betting revenue in the form of a “local share assessment” that goes to the General Fund for distribution to the Commonwealth Financing Authority for grants and local projects “in the public interest.” That slice won’t be affected by Davis’ measure.
Pennsylvania also has a $10 million licensing fee for sports betting, which would similarly be untouched under Davis’ proposal. That fee goes into the General Fund as well.
Tax revenue projection
Once fully standing on its feet, the Pennsylvania sports betting market is expected to be one of the largest in the country. The 36% overall tax rate is unusually high, so it remains to be seen if the Keystone State white market will wipe out the sports wagering black market.
Assuming Pennsylvania’s efforts to establish a healthy regulated sports betting market are ultimately successful, the state could see more than $100 million in annual tax revenue, per a 2017 study from Oxford Economics. The study, which was published before PA passed its sport betting law, didn’t factor in the 36% tax rate.
Why change existing law?
Pennsylvania launched Las Vegas-style gambling in 2006, after lawmakers approved casinos in 2004.
Around the same time as the state’s launch into casino gambling, the 2006 Taxpayer Relief Act was created to establish the Property Tax Relief Fund as a way to use gaming revenue to help homeowners. According to Pennsylvania’s Office of the Budget, the average statewide property tax reduction for each household is expected to be roughly $200 in 2018. Official figures are expected in May.
It’s worth noting that Philadelphia’s share of funding is used to reduce wage taxes instead of property taxes.
The state taxes slot machine revenue at 54%, electronic table games at 35% and table games at 16%. The 12 Pennsylvania casinos generated $1.4 billion in tax revenue for the state in 2017. According to the American Gaming Association, about $920 million of that tax revenue was used to reduce school taxes paid by Pennsylvania property owners.
Davis’ bill would send all of the 34% tax on sports betting directly to the Property Tax Relief Fund, rather than complicate matters by shipping it to the General Fund, which has been underwater in the past.