Governor Josh Shapiro (above), and other state leaders, are in favor of regulating and taxing skill games, which could benefit the state’s mass transit systems.
Shapiro had always been a proponent of skill games regulation, as he proposed a 42% tax on the machines back in February during his FY budget address.
However, that has since been left out of the budget, and the question of the legality of the machines will be answered by the Supreme Court of Pennsylvania. Should the court rule the games as legal, tax revenue would benefit a worthy cause in the Keystone State.
Shapiro supports skill games regulation
It’s been no secret that Gov. Shapiro has always viewed skill games as a potential revenue source for the state. He had a plan to tax the games earlier this year in his FY budget, which read:
“A tax of 42% on the daily gross gaming revenue from electronic gaming machines that involve an element of skill and are regulated by the Pennsylvania Gaming Control Board. This budget assumes the board collects the tax and deposits the money into a restricted account, which is then transferred to the General Fund. Estimates assume an effective date of July 1, 2024, with initial revenue collections realized in 2024-25.”
However, that plan fell short when no deal was reached by the deadline on July 1. A lot has changed since then, including the Pennsylvania Supreme Court now ruling on the legality of the games.
Transit needs the funding skill games could provide
In the meantime, Gov. Shapiro, along with Senate Republican majority leader, Joe Pittman, of Indiana County, separately said last week revenue generated from skill games could be used for mass transit spending.
“Mr. Shapiro, answering a question at an afternoon speaking event, said Rep. Matt Bradford, of Montgomery County — the leader of Democrats who control the state House — is ready to move forward on the general concept,” Ford Turner of the Post-Gazette Harrisburg Bureau wrote.
Gov. Shapiro proposed for $283 million in mass transit spending back in February. The final budget submitted only included $80 million. Ford wrote:
“Mr. Pittman said on Friday that the state is spending more than it is bringing in, and it would be difficult to find new sources within the existing budget for mass transit and transportation infrastructure money. The link with a potential skill games tax would take advantage of a ‘commonality of need.'”
Gov. Shapiro’s tax rate would raise $313.4 million by FY 2025/2026, which would easily cover mass transit spending.
State Supreme Court hears from PA casinos
The Pennsylvania Supreme Court has been busy as of late. Last month, 12 Keystone State casinos filed a complaint to the highest court. They argued that taxes on slot machines are unconstitutional because of the lack of oversight skill games have within the state.
The casinos involved in the complaint against the Department of Revenue and Pennsylvania Gaming Control Board include:
According to court documents, each property is arguing:
“There is no basis for requiring licensed entities to pay about half of their slot machine revenue to the Commonwealth while allowing unlicensed entities to pay no tax on such revenue.
“Accordingly, Count I seeks a declaration that the Gaming Act’s slot machine taxes are unconstitutional insofar as they apply to revenue generated from all slot machines in licensed casinos but not revenue generated from slot machines operated elsewhere in the Commonwealth.”
It’s extremely unlikely that casinos will stop paying taxes. However, it’s a tactic to put pressure on the state legislature to act on skill games sooner rather than later.
The Pennsylvania Supreme Court is also going to determine the legality of skill games altogether. The regulation discussion could be moot if the court bans the machines.