Pennsylvania Legislature Looks To Fix Casino Tax After Supreme Court Ruling

October 24, 2016
PA casino tax fix

The Pennsylvania legislature is trying to find a way to fix an unconstitutional tax on casinos before a state Supreme Court ruling puts a crunch on local communities.

Why PA’s casino tax needs to be fixed

This fall, PA’s highest court ruled that the state’s current casino host tax is unconstitutional.

The tax law as written when Pennsylvania first started handing out licenses for land-based casinos required casinos to pay 4 percent of their slots winnings to the jurisdictions in which they’re located. However, if that rate did not reach $10 million, casinos had to pay that much anyway.

That led to inequities in which casinos with less revenue were paying a higher effective tax rate. That disparity is what led the Supreme Court to rule that it was unconstitutional, in a lawsuit led by Mount Airy.

Since the law is now technically off the books, the state legislature will need to pass a new law that makes up for more than $140 million that isn’t headed to municipalities that host casinos.

When that will happen is not yet clear.

Discussions in Harrisburg on the casino tax

The Pennsylvania legislature is still in session ahead of the November elections. It is meeting this week and may add more days to the session to deal with pressing matters, possibly even the casino tax.

It might be handled in tandem with online gambling regulation and other gaming expansions in the state, something taht would actually make a lot of sense. A bill allowing PA online casinos could be voted as soon as this week.

The fix, on its face, appears to be pretty obvious. As one PA newspaper’s editorial board put it: “The remedy seems simple — choose a flat fee or a percentage.”

More from Lehigh Valley Live:

Casino contributions to host municipalities were an integral part of the bargain to legalize casino gambling in Pennsylvania. The money has paid for increased public costs associated with casinos. …

Since the casinos have been paying $10 million a year, that should be the starting point for discussion.

Such a tax would be both constitutional and basically make up for the inequity.

Host jurisdictions want action

The House Gaming Oversight Committee held a hearing on the subject last week, with local officials talking about the possible ramifications for their jurisdictions.

Despite the logical solution of a flat tax or a percentage tax, it isn’t quite that easy. Small PA casinos don’t want to pay the full $10 million; big casinos don’t want to pay a percentage of their larger overall revenue. And some jurisdictions that adjoin casino hosts, want to see money distributed beyond the current cities and counties.

The loss of the tax revenue — if it isn’t fixed quickly — could start having an impact on budgets that count on that money to make ends meet.

More from Pittsburgh’s NPR station:

“It’s shocking and devastating,” said Bensalem Mayor Joe DiGirolamo. Ten million dollars amounts to just over 20 percent of the township’s annual budget, and it was a major selling point for welcoming the casino, according to DiGirolamo.

He said the only place to cut significant costs from Bensalem’s budget would be in public safety, and “that’s not an option.”

Will the legislature act before the tax problems becomes more than just an issue to kick down the road? If it isn’t fixed before the November elections, it’s not clear when action will be taken.

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