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Pennsylvania Casino Tax Collections Highest In The Country, Beats Nevada

Posted on July 28th, 2010

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Revenue figures for fiscal year 2009 that ended June 30 show that the state of Pennsylvania collected the highest taxes from its casinos, exceeding that of Nevada for the first time, thus garnering the tag as the casino tax capital of the nation. Pennsylvania has one of the highest slot machine tax rates in the country. It charges a 55 percent tax on the gross revenues of its slot machine gambling. In Nevada, casinos pay the state around 8 percent tax on gross casino revenues, while roughly 9 percent are taken from the gross revenues of New Jersey casinos. Pennsylvania follows New York and West Virginia which have casino tax rates of 65 percent and 57 percent respectively.

What makes it remarkable is that Pennsylvania, which has only nine casinos, had tax collections for fiscal year 2009 that almost reached $1.1 billion, while Nevada, which came third with its 260 casinos and numerous slot machines and table games, collected only around $831 million. Second was Indiana which had $878 million from 13 casinos, with a tax rate of 31 percent. New Jersey, having 11 gambling facilities, collected $348 million. New York had only $455 million in tax collections from its 8 casinos.

According to the American Gaming Association, in the 2009 calendar year, Pennsylvania was also in the lead. Mike Lawton, senior researcher for the Nevada Gaming Control Board, was amazed upon learning that Nevada had been overtaken by Pennsylvania. But Richard McGarvey, spokesman for the Pennsylvania Gaming Control Board said it may be incredible, but not unexpected. He explained that the purpose of the gambling law was to raise revenue from tax that is why the state imposes a casino tax rate that high.

Gov. Ed Rendell has claimed that gambling revenues have provided so much benefit to the state. The state’s horse racing industry, which in the past was already ailing, received the much-needed assistance and is now among the country’s highest-paying industries. The host communities of the casinos have also been aided by the collections from gambling and have now been able to close their budget deficits. Last year, taxpayers were given cuts in their school taxes through the $770 million taken from the gambling revenues, allowing each taxpayer about $190 in savings, and more for senior citizens, according to Gary Tuma, the governor’s spokesman. Tuma said the gambling law’s aim was “to raise money that people were taking into other states.” He said it’s clear that the law has been successful.

However, there are some who are not impressed. Matt Brouillette, president of the Commonwealth Foundation said the gambling law only succeeded in producing additional spending money for the greedy politicians to squander, and all that money coming from the gambling losses of middle and low income gamblers. It seems that Pennsylvania is likely to enjoy the boom for some time yet. The recent gambling expansion in the state will boost some more the state’s tax collections. Table games, which the state started offering this month, are taxed at 16 percent and are projected to yield an additional $320 million annually, and another casino will soon open in Philadelphia in September. Therefore, even if the economy recovers quickly and Nevada is able to collect its previously recorded tax collection of $1 billion, it still may not stand the pace.

The positive aspect of Pennsylvania’s high tax rate is that the big casino tax collections have fixed the state’s budget gap during the economic downturn and have significantly cut property taxes. But industry analysts say there is also a disadvantage to the high tax rate. Casino operators would not be too willing to pour more of its funds to expand and modernize their facilities. Executives of Sands Casino Resort Bethlehem have said that the company would probably not invest so much again in a market with such a high casino tax rate, if they had to do it in the future.

Maryland had a problem looking for bidders to develop and run its casinos because of its exorbitant tax rate of 67 percent. Analyst Grant Govertsen, co-founder of Union Gaming Group, analysts for the worldwide gaming industry said most of the states that have recently approved gambling went for the high tax rate. He said a higher tax rate produces more revenue, but would necessitate less jobs and less investment.