Governor Josh Shapiro (above) attempted to budget for Pennsylvania skill games revenue in the fiscal year 2024/2025 report. However, it’s now more than likely the skill games revenue won’t be accounted for due to legality concerns.
Just last week, skill games legalization language had been removed from the budget, which all but sealed the fate of revenue being collected this fiscal year.
A decision on the legality of skill games needs to be decided first before the issue of tax revenue can be discussed. The decision rests in the Pennsylvania Supreme Court.
PA likely won’t collect skill games tax revenue this FY
Removing the legalization language was the first shoe to drop in Pennsylvania’s quest to tax skill games. The second, according to Erie News Now, Senate Republicans recently said, “the policy is probably off the table for budget negotiations.”
Gov. Shapiro proposed a 42% tax on skill games in February during his FY budget address, which officially started on July 1. The longer skill games without a resolution, the bleaker the situation looked. Despite Gov. Shapiro’s efforts, Pennsylvania likely won’t collect any revenue from skill games this FY.
The Commonwealth Court unanimously ruled the games as legal in December, which basically set the stage for taxation and regulation. However, the Pennsylvania Supreme Court had other ideas when it decided it would rule on the legality of the machines last month.
Skill games are now back to square one when it comes to the simple question of legality. It’s very well possible the Supreme Court bans skill games, which makes the tax debate moot. However, Pace-O-Matic, a Georgia-based skill games manufacturer, told PlayPennsylvania last month:
“We remain confident in the merits of our case, as their legality has been upheld unanimously by the Commonwealth Court as well as in every court where the legality of our games has been challenged.
“Our attorneys will continue to defend the legality of our skill games, which support local small businesses and fraternal clubs across the Commonwealth.”
How much could skill games generate if taxed?
Should the Supreme Court determine skill games as legal, the machines would produce hundreds of millions of dollars for the state.
At a 42% rate, Gov. Shapiro budgeted for $150 million for this FY, with the hopes of tightening protocols and regulation over the next several years. After doing so, he predicted the following outcomes:
- 2025/2026: $313.4 million
- 2026/2027: $314.8 million
- 2027/2028: $316.8 million
- 2028/2029: $317.9 million
The Independent Fiscal Office (IFO), a government agency that provides revenue projections and analysis, used Gov. Shapiro’s tax rate and calculated different totals, which include bullish results:
- 2024/2025: $103 million
- 2025/2026: $308 million
- 2026/2027: $376 million
- 2027/2028: $397 million
- 2028/2029: $421 million
There is another tax structure that Pennsylvania Senator Gene Yaw’s (R-23) included in a bill he introduced last year. At a tax rate of 16%, Yaw budgeted for around $300 million annually from skill games.
Generating upwards of $300 million a year, skill games could become an important part of the Pennsylvania gambling industry. It, first, has one more court case to win in the Supreme Court.
