As part of his budget pitch, Governor Josh Shapiro calls for a 42% tax on the slot-like games found in gas stations, bars, and convenience stores across Pennsylvania. The debate between the proponents and opponents of taxing these games continues.
Casino industry versus the skill-based games industry
This Week in Pennsylvania is a weekly show that discusses issues relevant to Pennsylvanians. Host Dennis Owens recently hosted a heated debate over taxing games of skill. Participating in the discussion was ClearPoint Communications Pete Shelly, who has Parx Casino as a client. Parx Casino is the largest land-based casino in Pennsylvania and offers online casino sites throughout the country under its betPARX brand.
The Public Affairs Officer (PAO) of Pace-O-Matic, Mike Barley, was the other participant in the show. Pace-O-Matic is the maker of the skill machines. Two of the main issues for debate were the tax rate and who should have oversight over skill games. The discussion over these issues clearly showed the opposing viewpoints.
The casino industry
Casinos represent a powerful lobby in Pennsylvania. When looking at the main contributors to the U.S. economy, the casino industry generates nearly $329 billion yearly in economic activity. This is according to a new study by the industry’s national trade association.
Casinos are taxed and regulated by the state’s Gaming Control Board. For instance, as much as 54% of the gross income from slot machines goes back to the state.
Casinos are in favor of taxing skill-based games that are currently unregulated, unchecked, and untaxed. They believe Governor Shapiro’s proposal for a 42% tax is a good start. The casinos believe that parity between the taxes on skill games and casinos is only fair. Skill games bring in significant income and could operate profitably at the same tax rate as casinos.
A report from the Independent Fiscal Office showed that if Pennsylvania implemented the 42% tax on skill-based games, it could yield about $103 million in general fund revenue for the 2024-2025 fiscal year.
In terms of regulation, casinos believe skill-based games should be supervised by the state’s Gaming Control Board. This is the job they do, so they can do it best.
Pace-O-Matic
Mike Barley insisted that Pace-O-Matic’s machines are legal. He said Pace-O-Matic was prepared to discuss tax rates and regulation but casinos had blocked this for years. Pace-O-Matic claims its machines don’t count as gambling because they require skill to play. Tens of thousands of these machines operate across Pennsylvania.
According to Mike Barley, small businesses like bars, restaurants, and social clubs rely on the games for supplemental income. The income can make a difference between whether they stay open or not. He believes the 42% tax is higher than these small businesses could sustain.
Barley also argued that the skills games industry doesn’t compete with casinos, as evidenced by the revenue casinos generate every month. He doesn’t believe the games should be under the control of the state gaming board as regulation wouldn’t be fair and impartial.
Competing agendas
One of the reasons why we love sports is because of the competition involved. The debate on This Week in Pennsylvania showed just how competitive the different gambling interests in Pennsylvania can be. There have been questions over the years about the legality of the skill games, and this has sparked years of litigation over their status.
Governor Shapiro said that he would like to see the lawmakers stop debating the issue and start working on it. They aren’t rushing to take firm positions. The governor is open to anything else lawmakers would like to get to the place of legalizing and taxing skill games.
