A proposal by Pennsylvania Governor Tom Wolf to tax the free play issued as promotional rewards by casinos will have the opposite of its intended effect by reducing overall slot revenues, according to the American Gaming Association.
Free-play bonuses funneled a rewards for loyal slot play have been the lifeblood of the Pennsylvania casino industry, making up for an onerous 55 percent slot revenue tax that otherwise results in paper-thin margins restricting casinos from offering players rewards to compete with those they receive in nearby casinos in other jurisdictions—particularly New Jersey, which imposes an effective 9 percent tax on slot win.
The AGA issued a statement last week officially opposing Wolf’s proposed free-play tax, which he has included in his budget proposal for fiscal 2016-17.
“Promotional credit marketing programs in casinos are no different than grocery store coupons, which are widely used to attract more customers to purchase and consume more goods,” said Sara Rayme, AGA’s senior vice president of public affairs. “While we appreciate the difficult budget deficit facing Pennsylvania, taxing promotional credits would likely lead to a decrease in tax revenue from casinos—the exact opposite of the intended result.
“Taxing Pennsylvania casinos’ promotional credit programs will be an economic deterrent to casinos offering such incentives, and consequently, result in a decrease in patron play and lower tax revenues generated for state and local governments.”
Rayme added that Wolf’s free-play tax proposal is unprecedented in the industry. “No state has regressed from a policy of tax-free promotional credits to a subsequent policy of taxing them,” she said. “Pennsylvania’s neighboring states are among those that have recognized the important role of this casino marketing tool and have refrained from imposing taxes on promotional credits. These states recognize that with competition among gaming states at an all-time high, casino operators must adapt and implement innovative business practices to effectively attract and engage customers.
“Increased taxes discourage reinvestment and prevent Pennsylvania casinos from meeting consumer demand, which, as we have seen in other states, leads patrons to seek these the latest gaming products in markets outside of the state. This would hurt Pennsylvania’s burgeoning casino industry and jeopardize jobs and millions in tax revenues.
“Pennsylvania’s 12 casinos already pay among the highest taxes of any casinos in the country. Yet few companies contribute to the Pennsylvania economy as gaming companies do. Each year, casinos in Pennsylvania provide more than $6 billion in economic impact, support more than 33,000 jobs and generate $2.4 billion in tax revenue when the significant ripple effect is considered. However, in order to maintain and build on these contributions, it behooves state legislators and regulators to view gaming companies as partners with the state and to seek progressive gaming policies. The tax treatment of promotional credits is just one of these important policies.”
