“The lady doth protest too much” is a famous line from Shakespeare’s play Hamlet. The expression is used in everyday speech to indicate doubt of someone’s sincerity, in particular the suspicion that someone who denies or reacts to something very strongly is hiding something. So, what does that have to do with the current debate in the state capitol about the taxation and regulation of skill games? Who doth protest too much? And what are they hiding?
The GOP leadership in the Pennsylvania State Senate has introduced Senate Bill 756, which would amend both the Gaming Act and the Crimes Codes to tax and regulate skill games. The bill’s proposed tax rate for skill games is 35 percent. By comparison, existing slot machines in the state’s licensed and regulated casinos are taxed at 54 percent, and VGTs (video gaming terminals) at truck stops are taxed at 52 percent.
In response to the bill’s introduction, a proponent of skill games issued what can only be described as an unhinged press release that described SB 756 as implementing “the highest tax ever in Pennsylvania history on small businesses and fraternal organizations.”
Adding to the hysteria, an entity called “Defeating Communism PAC” sent out social media messages accusing one SB 756 sponsor of “targeting PA firefighters + veterans.” All of this hyperbole over a tax rate for skill games that is substantially less than the tax rate for slot machines and VGTs, and despite the fact that a 2019 Commonwealth Court decision found that skill games fit within the definition of a slot machine under the Gaming Act.
Now that we know who doth protest too much — skill game proponents — we need ask what are they hiding? Simple math provides the answer: skill game proponents (including those worried about communism) support just a 16 percent tax rate for their machines. They tout that under this minimal rate, the Commonwealth “will add an estimated $300 million in new revenue to the state coffers in the first year.” That means the total revenue available in the state right now is a staggering $1.876 billion. The math is, well, the math: 16 percent of $1.875 billion equals $300 million.
One more equation for consideration: if skill games were taxed at the same rate as legal slot machines in licensed casinos — 54 percent — the Commonwealth would earn more than $1 billion in tax revenue. Yes, that is billion with a ‘b” and it is $712.5 million more than the $300 million that skill game proponents want the state to accept. These amounts likely explain why the largest distributor of skill games in the state has refused to provide lawmakers with any real financial data related to skills games, despite the fact that they agreed to do so more than a year ago.
The entire industry is a black hole: nobody in state government has any idea how much revenue these machines generate or where this cash goes. Lawmakers should know how much of this revenue stays with the social clubs hosting these machines before being asked to support any legislation to tax and regulate these machines.
In contrast, Pennsylvania casinos and VGT operators report revenue figures to the Commonwealth daily. These figures are made public monthly by the Pennsylvania Gaming Control Board. If skill game proponents want to be taken seriously by our decision makers, they need to open up their financial books and records for all to see. Pennsylvanians deserve nothing less. Let’s be clear: there should be no giveaway sweetheart deals for out-of-state interests operating in the dark.
_______________
Pete Shelly is a Harrisburg-based consultant to Parx Casino.
