Current Condition and Future Viability of Casino Gaming in Pennsylvania

The Pennsylvania Legislative Budget and Finance Committee (PA-LBFC) engaged Econsult Solutions, Inc. to analyze the current condition of casino gaming in Pennsylvania, as well as the future gaming environment as a whole. Pennsylvania legalized casino gaming in 2004, and the first casinos opened in 2006.  Since then, tax revenue from the casinos has contributed $8.1 billion in gaming tax revenues, in addition to property, wage, and other taxes. Tax revenue grew strongly from 2006 through 2012 due to the construction of new casinos and the introduction of gaming into regions that had no convenient casino options, before declining slightly in 2013.

ESI determined that The Pennsylvania gaming industry generated a total of $3.1 billion in total revenue and nearly $1.4 billion in state and local taxes in 2013. Revenues grew steadily as a significant new supply of slot machines entered the market each year from 2006 and 2010, in addition to the implementation of table gaming starting in July 2010. Total gaming tax revenues have stabilized, falling slightly in 2013. The decline is a result of four broad trends:

  • Table Game Tax Rates – Table game effective tax rates have declined because casinos pay a higher rate in the first 24 months of table games. The majority of Pennsylvania casinos hit the 24 month cut-off midway through 2012, meaning that 2013 was the first year to fully incorporate the lower rates for most properties.
  • National Trends – Macro-gaming patterns regarding slot (decline) and table (growth) activities respectively may have contributed to the tax revenue decline.
  • Cannibalization — The flight of previous revenue to nearby states (Ohio and Maryland) with new gaming venues may also be a contributing factor to the revenue decline.
  • Casino Openings – As casinos open in Ohio and Maryland, gamers deviate from their normal casino to investigate the new casino. Many of these gamers will return to their original casino, but the momentary shift will offset revenue.

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