Big week for online gambling in Pennsylvania

Our readers may recall our report last week that Pennsylvania House Bill 271 is far more important than it appears at present, and is intended to motivate the state Senate to move on repeated gambling expansion bills from the House that it has thus far ignored.

The bare bones bill has been designed so that the Senate can use it to put forward their requirements, including those regarding online gambling and DFS, thereby achieving progress on the legislation and breaking the deadlock caused by the Senate’s apparent indifference.

The bill at present only makes provision for the introduction of tablet gambling in the departure area of state airports, but as Rep. George Dunbar said last week: “We put in one thing, tablets in airports, and basically said, ‘You load it up with what you want in it. It puts the ball in their court.”

Dunbar and his House colleagues have in recent years twice seen gambling bills they have approved left to die by the Senate.

Today HB271 will be discussed in the Senate Committee on Community, Economic and Recreational Development following a generally inconclusive joint hearing held by the House Gaming Oversight Committee and the Senate CERD committee last week.

Dunbar and his colleagues will be hoping that the Senate will introduce the amendments and additions they want to see in order to achieve progress, but there could be problems from a ‘significant’ faction led by Sen. Tommy Tomlinson, who is emerging as an apparent adversary to gambling.

Tomlinson’s strategy, according to industry observers, is to push for tax rates so high that it will make it impossible for online gambling operators to survive. He does this on the claim that online and land operators should pay the same taxes, regardless of the considerably different business models and infrastructure of two dissimilar verticals.

Land operators currently pay tax rates of 54 percent on slot revenue and 16 percent on table games, whereas international experience has established that tax rates above 20 percent as a general rule make online gambling operations unviable.

Information site Online Poker Report illustrated the disparity by conducting a poll of New Jersey online operators (who pay a 17.5 percent tax rate) on how costs impact each dollar of revenue:

24 cents to advertising
20 cents to player reinvestment (player promotions and retention costs)
18.5 cents to payment processing, KYC, geolocation costs, and platform and content royalties
17.5 cents to taxes
12.5 cents to general and administrative needs, including staff
2.5 cents to other regulatory fees
That leaves five cents of profit from each dollar of revenue.

Read the interesting OPR assessment here: http://www.onlinepokerreport.com/24903/pa-bungling-online-gambling/