Pennsylvania will become even more strapped for cash after the Supreme Court ruled that a local slots tax is illegal.
On Wednesday, the Supreme Court of Pennsylvania ruled that the municipal portion created from slot machine taxes located outside the city of Philadelphia is in violation of the state constitution. This ruling was made because different rates are set on casinos based on the gaming venue size. Because of the ruling, the state is at risk of losing almost $50 million.
Fix the Problem
The court ruled that the General Assembly now has four months to fix the law created in 2004 when casinos were legalized. The law is open for revisions at the same time that the state is in desperate need of revenues. The gambling landscape has been set to change for some time in Pennsylvania with lawmakers considering video gaming terminals to be installed at bars as well as online gambling options.
After the announcement, different groups began pondering what the ruling meant. Senate Majority Leader Jake Corman had spokeswoman Jennifer Kocher make a comment on the matter by stating that the details of the decision are being reviewed and the consequences could be far reaching. The impacts of the decision are being determined and the next steps to take will be considered over the coming weeks. Also reviewing the decision is Dave Reed, the House Majority Leader, and Governor Wolf.
The decision came about after gambling venue Mount Airy filed a claim arguing that the tax by the state on revenues from slot machines that go towards the host municipality were in violation of a clause in the state constitution. In the constitution, it states that all taxes are to be applied uniformly on the same class.
Outside of Philadelphia, casinos pay a minimum of $10 million in taxes to the host municipality. SugarHouse, the only casino located within Philadelphia, does not pay this amount. The difference in the amount paid cost nine casinos in the state almost $50 million in the year that ended on the 30th of June. This amount was what had to be paid to meet the minimum of $10 million.
The gaming law was created to divide casinos that are located outside of Philadelphia into to two class groups. One group are those who earn more than $500 million in slot revenues annually and those who earn less. Tax structures were mandated based on these two criteria. The higher earners would pay 2% of their slot revenue while $10 million would be paid, minimum, in local municipal tax by those who earned less.
The main argument is that the casinos are paying different amounts to reach the $10 million minimum. For the last fiscal year, Presque Isle Downs paid 10% while SugarHouse paid 3.7%. Mount Airy had to pay a high percentage as well at 8.8%.
The Pennsylvania Department of Revenue has suggested that the state could choose to apply the minimum of $10 million to all casinos. However, if this were the case, the rates would be still be different and there would be no uniformity.
Many believe the General Assembly will have a hard time trying to find a solution that is fair for everyone. The four month time frame may not be long enough for a solution to be put in place that sees everyone paying their fair share of taxes. It will be interesting to see what lawmakers are able to come up with and how it applies to the gaming venues in the state of Pennsylvania.