Pennsylvania proposes applying 8% tax to casino free-play slots credits

pennsylvania-casino-slots-free-play-taxPennsylvania Gov. Tom Wolf wants to impose a new 8% tax on casino free-play slots promotions.

This week saw Gov. Wolf unveil his budget proposals for the 2016-17 fiscal year, despite the fact that Wolf and state legislators have yet to reach consensus on the 2015-16 budget, which is many months overdue and on which may rest the fate of the state’s online gambling ambitions.

Wolf’s 2016-17 budget proposal includes a new 8% tax on the free-play promotional credits that the state’s dozen casinos offer their customers. The tax would be applied retroactively to Jan. 1, which Wolf believes would add around $21m to the state’s coffers in the remainder of the current fiscal year, rising to around $51m for the full fiscal year that starts July 1.

Pennsylvania casinos are currently allowed to deduct promotional play credits from their slot winnings before the state takes its cut. These deductions amounted to 26.6% of total slots revenue in 2014-15, down slightly from their 28.1% peak in 2013-14.

Naturally, the state’s casino operators aren’t wild about Wolf’s proposal. Mohegan Sun Pocono president Mike Bean told that free-play was “one of the primary marketing tools that allows Pennsylvania casinos to compete” and that taxing this activity would cause Bean’s venue to “rethink using that tool.”

Eighteen US states currently tax free-play promotions to some degree but Pennsylvania already has the nation’s highest tax rate (55%) on slots revenue, while table games are taxed at a variable rate of 12-14%.

Pennsylvania’s slots market managed to endure both the state’s tax-hungry clutches and a dose of winter weather in the month of January. Figures released by the Pennsylvania Gaming Control Board show January’s slots revenue rising 2.1% year-on-year to $184.8m.

As usual, the Parx Casino ruled the slots roost, rising 3.4% to $30.9m, easily eclipsing runner-up Sands Bethlehem, which was up 1.7% to $23.4m. Three other casinos were in positive territory for the month, with the biggest gain coming from Mount Airy Casino Resort, which improved 11.2% to $11.1m.