Could VGTs Or Online Gambling Really Kill Pennsylvania’s “Golden Goose”?

Posted on August 18, 2017

[toc]If there’s a reason why the road to legalized and regulated online gambling in Pennsylvania has been such a long and arduous one, it’s that no one wants to kill the golden goose.

This week, the Pennsylvania Gaming Control Board released revenue numbers from the month of July 2017. According to those figures, the state’s 12 casinos pulled in more than $285 million from slots and table games once again.

In fact, the $286.98 million in revenue reported was down $1.5 million. That is a difference of just 0.51 percent, compared to July 2016. However, by most accounts, the state’s massive casino revenue numbers are holding relatively steady.

$1.4 billion in PA casino tax revenue annually

Thanks to a 54 percent tax rate on slot machines and 16 percent on table games, the state pulled in approximately $115.4 million in tax revenue from casino operations in July 2017 alone. The Gaming Board estimates Pennsylvania’s casinos generate approximately $1.4 billion in tax revenue annually. Despite a slip in the numbers of late, the industry is on pace to match that this year.

Since 2012, Pennsylvania has been the number-two state in the country in terms of casino revenue. It’s hardly the gambling mecca that Nevada and the Las Vegas Strip have become, with close to $11 billion in casino revenue reported annually. However, Pennsylvania and its more than $3 billion in annual gambling revenue have supplanted New Jersey as American’s second-favorite place to gamble.

Would online gambling kill the golden goose?

Anthony Ricci, the CEO of the state’s top-grossing Parx Casino, told lawmakers this past March that the casino believes many of the gambling expansion proposals under consideration by the state will actually lower the tax revenue generated by the local casino industry. Parx fears online gambling would “effectively kill the golden goose.”

At first glance, it appeared Ricci was referring to tax rate proposals for online gambling. Some proposed rates were much lower than land-based casino taxes in the state. The fear was that land-based casino patrons would migrate towards online games in big numbers. As a result, the state wouldn’t be getting as big a piece of the pie.

Pennsylvania lawmakers then spent the next few months debating back and forth as to where to set tax rates on online gambling.

New Jersey dispels this cannibalization myth

In the meantime, the neighboring state of New Jersey went about dispelling this cannibalization myth. Casino operators in New Jersey, like Caesars, reported online gambling actually helps the land-based business. The numbers prove them right too. In 2016, the $196.7 million in NJ internet gaming revenues actually helped turn around a decade of sliding casino revenues.

They have yet to pass online gambling legislation, and nothing is set in stone. Nonetheless, Pennsylvania lawmakers appear to have accepted the New Jersey example. In fact, they’ve moved towards an agreement on a reasonable tax rate. But while the fear of cannibalization from online gambling may have subsided, others remain.

Video gaming terminals: a new fear

The Pennsylvania House of Representatives included a measure to its comprehensive gambling expansion bill that would allow up to five video gaming terminals (VGTs) in most places with a liquor license. It also allows up to ten at truck stops and off-track betting parlors.

Most casinos seem to be against this idea altogether. In fact, Sands Casino Resort Bethlehem owner Las Vegas Sands recently backed a $1 million advertising campaign against VGTs by the Pennsylvanians For Responsible Government.

The fear is VGTs will cannibalize the existing land-based casino industry even more than online gambling ever could.

The reality is illegal VGTs are operating in increasing numbers across the state regardless.

The question is will Pennsylvania lawmakers allow VGTs to kill the golden goose? The answer is expected when the Pennsylvania legislature gets back to work this fall.

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Martin Derbyshire

Martin Derbyshire has more than ten years of experience reporting on the poker, online gambling, and land-based casino industries for a variety of publications including Bluff Magazine, PokerNews, and PokerListings. He has traveled extensively, attending tournaments and interviewing major players in the gambling world.

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