Colin McNickle: Pennsylvania gaming expansion’s marginal returns |
Featured Commentary

Colin McNickle: Pennsylvania gaming expansion’s marginal returns

Colin McNickle

State-sanctioned gambling — “gaming,” in the parlance of its overlords — has seen marked growth in Pennsylvania. But as a new analysis by the Allegheny Institute for Public Policy notes, the returns — initially sketched as the be-all and end-all on many fronts — remain marginal when considered in context.

“In the last 13 years or so, gaming in the commonwealth has grown substantially — from slots, to tables, to sports wagering — and will continue to grow with smaller regional casinos opening,” says Frank Gamrat, executive director. “It was originally sold as a way to keep Pennsylvania gamblers from spending their money in other states while attracting gamblers from neighboring states and then using the tax money to offset property taxes or supplement the general fund.”

The same rationale was employed when Pennsylvania, on the heels of the U.S. Supreme Court sanctioning legal sports gambling, last year authorized sports wagering.

But neighboring states — such as Delaware, Maryland, New Jersey, Ohio and West Virginia — have either authorized their own gambling parlors or expanded to keep up with Pennsylvania.

“The competition of out-of-state gaming has undoubtedly lowered out-of-state gamblers, meaning that the bulk of the state’s gaming revenues are coming from Pennsylvanians,” Gamrat says.

And he also reminds, that means money spent at the casinos — in reality, money lost — “is money that is not spent on other goods, be they recreational, luxuries or necessities.”

“With more facilities surely on the way as 2019 unfolds, it’s certainly too early to draw any conclusions about sports wagering,” Gamrat says, but “one thing is clear: The commonwealth is not going to generate a large percentage of its expected $34 billion in total general fund revenue from sports wagering even if it tops a couple million dollars per month in wagering taxes.”

A recent news article notes that of the six states to legalize sports gambling following the high court’s ruling — Delaware, Mississippi, New Jersey, Pennsylvania, Rhode Island and West Virginia — only New Jersey has met its revenue projections.

“Pennsylvania’s haul has been about half of what it expected, thus far,” Gamrat says. “Then, too, the history of taxes from slots and table games revenues shows the commonwealth should not bank on these gaming revenues to account for a substantial share of state tax revenue.”

Slots gambling bowed in Pennsylvania in 2006. The number of casinos reached 12 in 2013, the same year revenue (measured as gross terminal revenues) reached its high-water mark.

Of course, little in the way of promised property tax relief has materialized from slots with the average annual collection of $801 million over the last five years. School property taxes collected are roughly $13 billion per year.

Slots revenue represents only about 6% of school taxes paid. And with slots revenue remaining flat over the past five years while property taxes continue to climb, that percentage will fall.

The bottom line in all this is that the amount of realized gambling tax revenue is insufficient to keep pace with the growth in government expenditures.

“Promoting the use of gaming revenues to shore up the general fund in a substantial way is proving to be a foolish venture,” Gamrat says. “A better way to bring in higher tax revenues would be to improve the business climate by rolling back tax rates and reducing the burdensome regulatory environment to encourage new firms to locate, or existing firms to expand, in Pennsylvania.”

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy and can be reached via email.

TribLIVE commenting policy

You are solely responsible for your comments and by using you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.