Pennsylvania State Senator Jay Costa, along with co-sponsors Senators Wayne Fontana, Vincent Hughes, and Judith Schwank, introduced Senate Bill 524 on Monday, an overarching gambling bill which includes the legalization and regulation of online poker in the state.
Costa previewed the bill in January when he filed a Senate Co-Sponsorship Memorandum, but this is the first time we have seen the initiatives laid out in full. Much of it we already knew was coming. In addition to legalizing and regulating online gambling (not just poker), it also does the same for daily fantasy sports. It expands land-based gambling, as well, allowing for multi-state progressive slot machine jackpots as well as “skill-based” slot machines.
Airports would also be allowed to have “multi-use computing devices” (read: tablets) in designated areas for online gambling. Legislators were split on this issue last year, as many didn’t like the idea of expanding gambling out of casinos.
The part of SB 524 that will likely be the most controversial is the costs it sets for online operators. Compared to other bills that have already been introduced in Pennsylvania, Costa’s bill just pummeled licensed operators with taxes and fees to the point where it wouldn’t make sense for any but the richest operators to jump into the market.
SB 524 would impose a license fee of $10 million, compared to $8 million for the other bills. For vendors, those companies that would not operate online gambling sites, but rather provide them with things like software or servers to support their operations, the licensing fees would also be much higher: $5 million compared to $2 million.
The nuttiest one, though, is that Costa’s bill sets the tax rate for online gambling and daily fantasy sports at a whopping 25 percent, versus 14 percent in the other bills. 14 percent is reasonable; it is in line with the tax rates of other states and still gives the government a chance to pull in solid amount of gambling income. 25 percent, though, is just punishing.
Online gambling operators have to be able to actually make a profit in order to stay in business. They can’t do that if the government goes ballistic with taxes. That’s not to say there should be no taxes – we all know everyone needs to pay their fair share to help our societies function (well, except Donald Trump) – but making the added gaming tax so high is just unnecessarily punitive.
And if it doesn’t hurt the online gambling operators, it will surely hurt the consumers. Does anyone think the online poker sites wouldn’t just pass the tax expenses on to the players in the form of rake. Or do we not think the casino operators would just dial back the payout rates slightly to make up for their added tax burden?
