The 12 casinos of Pennsylvania, which are in the midst of a battle against a proposal from Governor Tom Wolf to tax free play offered to patrons, are battling another tax-related challenge in state Secretary of Revenue Eileen McNulty’s plan to hike the assessment on gambling revenues used to pay the state’s cost of regulating the industry.
McNulty issued a letter to casino operators March 31 informing them that the tax used for regulation will be increased from 1.5 percent of gross gaming revenues to 2 percent of GGR, a hike of 33 percent that would translate into an increase in regulatory costs from $56 million to $75 million.
McNulty said in the March 31 letter that the increase is necessary “due to cost increases such as benefit, pension and contractual salary increases.”
On April 28, the operators protested the proposed hike in a letter to McNulty, complaining that the “surprise, unilateral determination to increase regulatory costs and expenses by 33 percent is a regrettable departure” from the spirit of partnership that has existed between the state and the industry.
The letter also cited a 2014 analysis that found Pennsylvania’s regulatory costs—as well as its gaming revenue taxes—were already among the highest in the United States.
Also last week, the Pennsylvania House Gaming Oversight Committee opened a series of hearings at Hollywood Casino at Penn National Race Course on ways to help the state’s casino industry remain competitive. Issues include cannibalization from casinos in neighboring states, saturation, and proposed policies that could hurt the casinos’ competitive position.
Those moves include proposed smoking bans and Governor Tom Wolf’s proposed tax on free-play promotional credits.
At the hearing, Penn National Senior Vice President John Finamore called Wolf’s proposal a gift to neighboring states. “The reality is that the only folks who would be happy with this would be the neighboring jurisdictions,” he said, according to the state House blog on witf.org. “They would be applauding the fact that Pennsylvania would consider taxing promotional credits.”
Gaming Oversight Committee Chairman John Payne, who is sponsor of a gambling expansion package that would add online gaming and slots at off-track betting parlors, said lawmakers need to be mindful of any policies that would weaken the state’s casinos with respect to new competition. “It’s no secret that when Ohio opened, it had a big impact on our casinos in Pittsburgh and Erie—Erie in particular,” he said. “Nemacolin is feeling the stress and the pressure. If, in fact, two casinos opened in northern New Jersey, I would think it would have a severe impact on our casinos in the Poconos and the eastern part of the state.”
The panel’s next hearings will be at Valley Forge Casino and Resort and Parx Casino in Bensalem.
