Pennsylvania iGaming Hinging on Tax Rate Debate

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Taxes and licensing fees continue to be the major sticking point for online gambling legislation in Pennsylvania, even as a third iGaming bill has been put forward.

Two bills seeking to legalize and regulate iGaming in Pennsylvania landed on the floor of the State House and Senate earlier this year. SB 477 and HB 392 are practically identical.

Now, a third piece of iGaming legislation has been introduced to the State Senate. Sponsored by Senate Minority Leader Jay Costa and three other Democratic Senators, SB 524 is calling for increased tax rates and licensing fees for iGaming operators.

The major difference in this new piece of legislation is that it proposes a 25 percent tax rate on iGaming operations against 14 percent in the other two bills.

The new bill is also seeking a $10 million licensing fee rather than the $8 million fee previously proposed, and a $5 million industry vendor fee as opposed to the $2 million fee in the other pieces of legislation.

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The new bill could be considered a concession to the state’s biggest casino.

Representatives from Philadelphia’s Parx Casino turned up at a joint hearing of the House Gaming Oversight Committee and the Senate Community Economic & Recreational Development Committee earlier this month where proposed iGaming legislation was a major topic of discussion.

Pennsylvania’s 12 land-based casinos pay a 16 percent tax on table game revenues and 54 percent tax on slot machine revenues. This represents the highest tax rates on casino operations in the country.

At the hearing, Parx officials said charging online operators a lower tax rate than land-based casinos would “kill the golden goose,” and essentially cannibalize the existing brick and mortar industry.

Ten of the other 12 casinos in Pennsylvania disagree and support the previously proposed iGaming legislation.

The Pennsylvania Gaming Control Board says the land-based casino industry generates some $1.4 billion in annual tax revenue.

Measures to legalize and regulate iGaming in the state are obviously designed to increase that number. However, Parx is warning the reverse might end up the reality.

Certainly, if the majority of slot players in the state migrate to online casino operations, whether the state charges 25 percent or 14 percent, the tax revenues generated will decline significantly from the 54 percent currently going in state coffers from land-based slots.

The question then becomes, are these land-based slot players the same ones who would play at online casinos. The majority of Pennsylvania casinos believe they’re not, but Parx remains concerned.

Only time will tell if the higher proposed tax rates in this new piece of legislation will help ease those concerns and allow state lawmakers to move forward with at least one piece of iGaming legislation soon.

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Marty Derbyshire has been covering online gambling for various industry media outlets since 2007.

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