PA gambling tax revenue highest in the country
Property tax relief hovers
By Melissa Daniels | PA Independent
HARRISBURG — Every dollar in the slot machine adds 55 cents to Pennsylvania’s tax revenue, contributing to the largest pot of gambling tax revenue in the nation.
That means Pennsylvanians see more return from the gambling operations than any other state, including Nevada and New Jersey.
But not all groups are satisfied with how that money gets returned, and growing competition from surrounding mid-Atlantic states is a potential threat to the revenue stream set aside to help property owners pay their tax bills.
In Pennsylvania, gambling brought in a total of $3.02 billion in consumer spending in 2011. Of that, $1.456 billion was returned to the state in tax revenue, the highest of any of the states tracked in the report, “State of the States” from the American Gambling Association, a national group representing the commercial casino industry.
The Pennsylvania gambling industry still is in its infancy, but the figures suggest success, especially since they are the first estimates that include revenue from table gaming, legalized in 2010. The previous year, spending totaled $2.49 billion leading to $1.328 billion in revenue.
Holly Wetzel, vice president of communications for AGA, said Pennsylvania’s become a model for other mid-Atlantic states expanding into the casino industry.
“Before Pennsylvania opening up, Atlantic City was really the only gaming market serving the mid-Atlantic and northeast region, it was certainly the largest and it was a bit of an underserved region in terms of gaming availability,” Wetzel said. “We’ve now seen Pennsylvania has been hugely successful and there are some other states that have since come on, Maryland, and soon to be Massachusetts.”
Pennsylvania isn’t the only place where benefits from casinos are lauded as a form of economic development. According to the AGA report, 47 percent of community leaders nationwide said the introduction of casinos was better than their expectations, and 70 percent said casinos are a good source of tax revenue.
But in Pennsylvania, not all residents feel this growth equally. Property tax relief from gambling revenue is determined by school district with a formula from the state Department of Education. This means residents in different parts of the state will receive different amounts of relief. This year, relief ranges from $25 to $632 per household, according to data from the Pennsylvania Coalition of Taxpayer Associations, a group representing other associations statewide.
The average savings per household is $186.
PCTA spokesman David Baldinger said the idea that casinos were legalized as a form of property tax relief was “sweetener to make it more palatable.”
“It was sold as property tax relief, and from the get-go it was never about property tax relief,” Baldinger said.
Overall, 79.5 percent of gaming revenue in Pennsylvania comes from slot machines — there’s 26,510 statewide, according to AGA. Gambling taxes come from slots, as well as table games, but the tax structures differ. Slot machines are the only source supporting property tax relief directly at 34 percent. The remainder of the 55 percent tax revenue is divided among the horse racing industry, economic development projects and local governments near the casinos
Tax revenue from table gaming at 16 percent is almost exclusively directed to the general fund.
Baldinger said he doesn’t see the tax structure changing anytime soon, though he commended the portions of the budget that go toward local governments to help fund services like firefighters. But still other parts of the law are prone to controversy.
In Philadelphia, the only locality where property tax relief funds are diverted to wage tax relief, two House Democrats are pushing for a five-year switch, said Bill Thomas, a spokeswoman for state Rep. Rosita Youngblood, D-Philadelphia, who is behind House Bill 2361.
The Philadelphia school district has a million budget gap between $90 million to $94 million for the 2012-2013 school year, and the bill would put around $86 million from gambling tax revenue toward the school budget, instead of a wage tax relief that averages out to be $50 per employee, Thomas explained.
To advocates of the bill, even a five-year term would help taxpayers with the burden of property taxes from the indebted school district.
“Rep. Youngblood has been advocating for at least studying whether or not Philadelphia should use gaming revenue for property tax relief as opposed to wage tax relief,” Thomas said. “All other counties, especially if they’re going to do a full assessment and property tax payers are going to be facing much more of a burden in Philadelphia than they were six years ago.”
Wherever the tax revenue winds up, there’s a chance on the horizon it could plateau before there’s a chance to have the structure provide additional tax relief.
Richard McGarvey, spokesman for the Pennsylvania Gaming Control Board, said that while the state has seen a growth spurt since the first casino opened in 2006, the landscape of gambling available on the East Coast is changing.
As surrounding states like Ohio, Maryland and New York increase their activity, out-of-state casino visitors could stay closer to home, McGarvey said.
“Anytime you add facilities you expect to see revenue growth, but keep in mind there’s a lot of competition,” he said.
If those states have a better tax structure than Pennsylvania, or one that profits the casinos more, it could mean better facilities across state lines.
“If you want to have the type of property and keep your property updated and add new amenities to a property, it’s much easier to do that and much more amenable for a gaming company who has to watch their bottom line to do that if the tax rate is reasonable,” Wetzel said.