The supporters of legalisation of online gambling in Pennsylvania are in for a major disappointment. It has come to light that the state might have a very high tax plan for the industry. The state’s senate had announced on Tuesday its proposal for legalising the business. Two state committees had given their approval for HB 271. It would legalise daily fantasy sports and online lottery in addition to online gambling.
The support given to the amended bill has indeed thrilled its backers. They have been pushing for the law since 2016. But its proposed tax rates have raised many eyebrows. The state has recommended a 54% tax to be levied on online casino revenue. It’s the same rate that operators have to pay on revenues from land-based slots. Revenues at online poker operations will be taxed at 16%, which mirrors the rate on land based casino table games.
Proposed Taxes in Pennsylvania
There’s a likelihood that the proposed taxes were set at a very high rate so that they could help generate revenues for the state that is facing a huge budget deficit. In fact, the business is expected to generate around $400 million over a period of five years. However, what lawmakers don’t seem to have realized is that the state will not earn too much money if enough operators don’t line up to apply for licenses.
It is important to keep in mind that operators will have to pay a license fee of $5 million to start a poker or casino website. If they wish to offer both casino and poker then the license fee will be $10 million. License renewals will cost them $250,000. What makes it even more difficult for them is that these high fees cannot be credited against any tax obligations in the future.
Daily Fantasy Sports Operators in Pennsylvania
Daily fantasy sports operators have an entirely different tax structure. They have to pay license fees amounting to $50,000 or 7.5% of their annual revenues, whichever works out to be lower. These five-year licenses can be renewed for $5,000. Over and above this, DFS operators will have to face a 12% tax on overall revenues.
The state’s proposal for iLottery has also drawn a lot of flak. The state lottery will be given leeway to offer a wide range of games as long as it doesn’t stimulate casino style games. There are concerns that games that resemble slots, roulette, blackjack, or poker will draw business away from land-based businesses. The land based gambling lobby is a very influential one and it doesn’t care to lose any of its business to its online counterpart.
The Gambling Bill in Pennsylvania
The gambling bill has a long way to go before it can become law, and even then not without undergoing significant changes. There is a strong likelihood that the House of Representatives will ask for changes to it. It is very important to have a carefully thought out regulatory framework for the online gambling industry because this is the only way to ensure that all parties concerned have their interests protected.
If Pennsylvania doesn’t pass a gambling law with a reasonable tax structure then there is a strong likelihood that its online gambling industry will never take off. This will deprive the state of a very good source of tax revenues. Furthermore, residents of the state will end up playing at unauthorised sites. These won’t necessarily offer them a safe and reliable gambling experience. The neighbouring state of New Jersey has managed to build its online gambling industry into a money spinner. Online casino sites there earned $19.5 million in revenues in March alone. On the other hand, poker sites pulled in $2.25 million during the same month. Pennsylvania could certainly benefit from following its neighbour’s lead.