Report finds online gaming could bring PA millions in taxes

By Andrew Staub | PA Independent

HARRISBURG, Pa. — A report released Wednesday indicated Pennsylvania could bring in millions of dollars in new taxes if it legalized online gambling, but there’s no guarantee thus far that lawmakers will try to use it as a money maker in next year’s budget.

State Senate Majority leader Dominic Pileggi, R-Chester, hasn’t yet taken a position of whether or not Internet gaming should be included in the upcoming spending plan, but said the issue deserves a “serious look” and indicated discussion would be based on more than just one budget year.

“Fundamentally, there’s a policy decision: how much gambling do we want to make available to the citizens of Pennsylvania?” Pileggi said.

What gaming the state has made available has paid dividends for its budget, according to the report from the Legislative Budget and Finance Committee, a bi-partisan, bi-cameral research agency.

RAISING THE STAKES: A new report found that online gambling could bring Pennsylvania millions of new tax dollars, but some don’t think it’s a sure bet.

Casinos have pumped more than $8 billion in gaming tax revenues into the state’s coffers since 2006, while also contributing property tax, wage and other tax revenue, according to the report

While the state has already collected the “low-hanging fruit” with casinos that offer slots and table games, Internet gambling — or iGaming — would offer the most potential of new gambling revenue streams, said Stephen Mullin, president of Econsult Solutions, the firm that assisted the committee in the study.

Tax revenues from iGaming could hit about $70 million in the first year and more than $110 million annually in the years after, Mullin said.

“While there is a reasonable degree of uncertainty, the available evidence suggests the net effect of iGaming would be to complement — and not cannibalize — existing land-based casino revenues in the state,” Mullin said. “This may seem counter-intuitive, but it is important to remember that iGaming is in a lot of ways a different activity than casino gaming.”

That sounds like good news, considering Pennsylvania’s revenues were lagging by more than $500 million at the beginning of the month, further complicating Gov. Tom Corbett’s proposed 2014-15 budget.

That didn’t stop the Coalition to Stop Internet Gambling from splashing cold water on Internet gaming even before the report was released Wednesday. A day before, the coalition had already pointed to a cautionary tale in New Jersey, where online gambling revenues haven fallen drastically short of initial expectations.

The Garden State initially projected online gaming could bring as much as $180 million in new tax revenue, but now expects just $12 million this year, according to the Associated Press.

Colin Hanna, a former Chester County commissioner who is now president of the conservative grassroots organization Let Freedom Ring, believes the notion that gambling is a source of free revenue is “seductive and destructive.” He can’t help but picture a gambling addict clad in pajamas and surrounded by empty pizza boxes and booze, he said.

Unlike a casino, the Internet lacks the checks to keep such a vulnerable population from inflicting further harm on themselves, Hanna said. Minors could also find ways through security systems to reach an online poker table, he said.

“I can only have contempt for a lawmaker who is willing to sacrifice the health of his or her state — the very social fabric of the state — in order to chase after a couple of bucks,” Hanna said. “It is morally bankrupt as a choice.”

The report generated optimism among other groups. John Pappas, executive director of the Poker Players Alliance, praised the study’s findings in a statement. He said the report “truly changes the discussion in the state from if there will be licensed and regulated online gaming in Pennsylvania to when.”

“As more states choose to embrace online gaming, the market — and thus tax revenue — will only continue to increase,” he said.

Pennsylvania entered the casino market at an opportune time — when the region had no convenient option for gamblers. That, coupled with construction of new casinos, contributed to tax revenue that grew from 2007 through 2012, the report found.

That’s not to say the state isn’t vulnerable. Gaming tax revenue dropped last year, as surrounding states attracted gamblers with their own casino offerings and lower table game tax rates went into effect in Pennsylvania.

Senate President Pro Tem Joe Scarnati, R-Jefferson, sponsored the resolution authorizing the study and acknowledged the changing climate.

“It has become clear that Pennsylvania casinos are facing increasing competition from our surrounding states, some of which have begun to utilize new and innovative gaming revenue generators. As we move forward, authorization of online gambling in the state will be explored,” Scarnati said in a statement.

The topic will be a point of discussion between now and June, Pileggi said, indicating lawmakers would have to answer questions about what sort of model of Internet gambling might fit.

Asked if those issues could be sorted out over the next two months, Pileggi said legislation from other states could serve as references.

“People have been looking at this issue for some time, so it’s not a brand-new issue,” he said.

Andrew Staub is a reporter for PA Independent and can be reached at Andrew@PAIndependent.com. Follow @PAIndependent on Twitter for more.

Rob Port is the editor of SayAnythingBlog.com, a columnist for the Forum News Service, and host of the Plain Talk Podcast which you can subscribe to by clicking here.

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