Penn National pushes back on tax parity, lottery proposals in PA iGaming debate

April 28, 2017 7:08 PM
  • Aaron Stanley
April 28, 2017 7:08 PM
  • Aaron Stanley

Penn National Gaming is on the ground in Harrisburg fighting off proposals that could undermine Pennsylvania’s efforts to implement online gambling to help plug the state’s $3 billion budget deficit, the company said in its first quarter earnings call Thursday.

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Specifically, Penn is seeking to ward off an attempt by legislators to tax online casinos at the same rate as land-based casinos, as well as a separate proposal to have the state lottery operate online gaming instead of private companies.

Eric Shippers, Penn’s senior vice president of public affairs, said that the effect of the tax parity proposal would be that no operators would sign up to participate in the freshly-minted regime.

“The key question around iGaming right now is focusing on the tax rate that would be applied, he said. “We are trying to knock down some sort of silly notion that you could have tax parity between iGaming and the slot machines and that it could be a successful industry.”

“We’re trying to convince them that if they do this, no one will sign up for it,” Schippers continued, ”We’re spending a lot of time trying to educate legislators on that business.”

State Rep. Scott Petri, chairman of the House Gaming Oversight Committee, and a cadre of other legislators have recently become adamant that online operators should pay the same rate as brick-and-mortars.

Land-based casinos in Pennsylvania pay a rate of 54 percent for slot machines and 16 percent for table games – a stark contrast to the 15 – 25 percent rates for online that have been heretofore debated.

Such a tax regime for online gaming would rank the state among the world’s most heavily-taxed, according to Chris Grove of Online Poker Report.

Schippers added that Penn is concurrently fighting off a separate proposal that would establish the state lottery as the sole online gaming provider.

State Senator Joe Scarnati has been floating an idea that the state lottery could more efficiently and profitably than private operators, a notion that Penn and others take issue with.

Penn National operates Hollywood Casino at Penn National Racecourse near Harrisburg. While Penn has no current online presence in New Jersey or other any other market in the U.S, it does have a free-play social casino application – Penn Interactive Ventures – that could be leveraged and transformed into a real money game.

A study commissioned by Play Pennsylvania and Online Poker Report (http://www.playpennsylvania.com/online-casino/) estimates that the state could reap $126 million in initial licensing fees and $426 million over five years by legalizing online gambling at a 20 percent tax rate.

Schippers also said that video gaming terminals are still in the mix. “There’s still discussion as well around video gaming terminals in the bars and taverns, more so in the House than in the Senate. And there’s some discussion around satellite facilities that would take the place of that concept.”

He also said that he expects a few more months of debate and conversation before a final product emerges.

“I would expect that you’re going to see some of the discussions start to gel a little bit more this summer in the June timeframe, but until then, I think a lot of it’s just going to be noise and posturing.”