To many Pennsylvania has never been closer to legalizing online gambling. In fact, the state has been working on opening its market for Internet gaming options for some time now. However, obstacles of different nature have been obstructing legislators from taking the final step of signing any of the multiple iGaming bills introduced into law.
This year’s legislative session was marked by the early introduction of two legislative pieces – HB 392 and SB 477. They both fall easily into the category of omnibus bills, given the fact that the two of them contain provisions for the legalization and regulation of online gambling and daily fantasy sports, the addition of slot machines at designated facilities and the authorization of tablet gaming at designated airports.
A new bill – SB 524 – was presented to the state Senate earlier this week. The legislative piece is sponsored by Sen. Jay Costa and other Senate members. Generally speaking, the legislation is not that much different from the above-mentioned two pieces. It, too, calls for the overall expansion of the state’s gambling industry, expansion that includes online gambling.
What the three bills differ in, or rather what makes SB 524 different from the other two is the tax rate it proposes for online gambling. If Sen. Costa’s legislation is signed into law, it will tax iGaming operators at 25% on gross gaming revenue. The previous two bills propose 14% tax rate on gross gaming revenue.
Taxation has been among the sticking points to have been hampering any considerable progress on the legalization of online gambling. Here it is important to note that iGaming has been presented as a possible revenue stream for the state’s a bit too-tight budget and as a boost to its land-based casino industry.
Different tax rates have been proposed over the several years during which the legalization of online gambling has been discussed. However, involved parties have failed to reach an accord on any rate. During this year’s legislative session, the proposed 14% rate was considered way too low, especially when bearing in mind the tax rate imposed on land-based operators.
Pennsylvania’s twelve casinos are taxed at 54% on slot machines revenue and at 16% on revenue from table games. It is true that the gap between the slots tax rate and the iGaming one is too big. On the other hand, it is quite difficult to predict whether online gambling will turn out to be the profitable industry many believe it will be when and if legalized. This is why, a 14% tax may be a bit more reasonable to be imposed on an immature gambling market. For example, neighboring New Jersey taxes online operators at 15% on gross gaming revenue.
Turning the focus to Sen. Costa’s 25% tax rate, online gambling proponents immediately labeled it too high to be healthy for the state’s future iGaming market.
With two conflicting rates in the Pennsylvania Legislature and numerous other hurdles to be overcome, the legalization of online gambling seems to be doomed to further delays. Lawmakers are faced with the difficult task of finding the golden middle between a tax that would not kill the newly regulated industry’s viability, but would also be fair enough when compared to what is collected from casinos for their brick-and-mortar operations.
