No, Pennsylvania, Online Gambling Can’t Be Taxed At The Same Rate As Land-Based Casinos

April 18, 2017
No, Pennsylvania, Online Gambling Can’t Be Taxed At The Same Rate As Land-Based Casinos

Some Pennsylvania lawmakers are trying to implement a harebrained scheme to legalize and regulate PA online gambling.

It’s so inane, that by legalizing online gambling, it would actually have the opposite effect, keeping legal iGaming out of the Keystone State.

Where things stand in Pennsylvania on gambling

A Senate committee was set to start work on a gambling package today. The House bill that is the vehicle for gambling expansion in the state — H 271 — passed out of a Senate committee by a margin of 13-1.

The bill is just a shell right now — it just authorizes tablet gaming in some PA airports. We know, however, that the plan is to load this up with revenue-producing gambling measures eventually.

One of the possibilities for such an amendment is the authorization of online gambling. However, there are concerns about how such regulation would be worded, and how it would be taxed.

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The PA online gambling component

There have been a variety of gaming bills that have popped up this year in PA, all of them with slightly different approaches for legalizing online gambling. Most have had a fairly reasonable tax rate associated with online gambling.

But even a 25-percent tax rate — the highest of any proposal to date — would be too high to sustain an iGaming industry in PA.

Now, we know that there’s a proposal likely coming in the Senate that would tax it at a far higher rate.

State Sen.Tommy Tomlinson is insisting that tax rates for online gambling mirror the rates set for the state’s land-based casinos.

Sources further assert that Tomlinson’s advocacy is gaining significant momentum among his colleagues.

Currently, Pennsylvania taxes land-based slots at 54 percent and table games at 16 percent.

A 54-percent tax would kill PA online gambling

Tomlinson’s possible tax rate conflates land-based gambling and online, which are not the same animal whatsoever.

We know this: No one would offer online slot machines in Pennsylvania if they are taxed at 54 percent. The margins are far lower for the online product.

The state is trying to legalize online gambling to generate hundreds of millions of dollars in new revenue.

While there is a possibility that operators would try to offer table games online at the lower tax rate, this is not likely to generate really meaningful revenue for the state. All we have to do is look at land-based revenue for table games vs. slots for PA casinos. The former is a fraction of the latter.

The Tomlinson proposal — at least what we know of it — would be a giant fail on the revenue front. Here’s hoping Pennsylvania lawmakers don’t fall for a tax rate that doesn’t accomplish any of the state’s goals when it comes to iGaming.

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