Pennsylvania Casino Closures Drop Revenue 84%, Have ‘Massive’ Tax Implications

Posted on June 3, 2020 - Last Updated on May 11, 2020

Total gambling revenues reached $304 million in February, a 17% percent increase over the previous month. It seemed like a solid start to 2020.

Then coronavirus happened and everything, including gambling and tax revenues collapsed like a house of cards.

Tax revenue fell nearly $106 million in Pennsylvania from January ($124 million) to April ($18.3 million).

Total operating evenue in March was $153 million, down 50% from the previous month. Things got worse in April. Overall gaming revenue dropped to $46 million, a devastating 84% compared to April 2019.

Devastating impact to PA casinos

The economic impact of casino closures in Pennsylvania is massive and unprecedented. The American Gaming Association reports that the casino gaming industry in the state supports more than 33,000 jobs and has a total economic impact of $6.3 billion.

During the past few months, casinos in Pennsylvania continued philanthropic efforts in the community. Rivers Casino Pittsburgh teamed with other community organizations to donate over 33,000 meals. Rivers Casino Philadelphia, Hollywood Casino and Valley Forge Casino also distributed food to the community.

American Gaming Association SVP of strategic communications Casey Clark said:

“We talk a lot about the role gaming plays as a good community partner and its role economically with helping small business revenue and non-profits. The glimmer of light in all of this is you have seen casinos and their community partners come together and step up to support their communities. The impact has been absolutely devastating across the board.”

PA casinos close

Casinos in Pennsylvania started to voluntarily close on March 12. The Pennsylvania Gaming Control Board ordered the remainder to shutter by March 17.

With all 12 brick-and-mortar closed, revenue tumbled. Without land-based casino table games and slots, the only revenue generated in April came from iGaming, sports betting and fantasy contests. Even though PA is only one of four states with iGaming, it has not filled the huge deficit left from prolonged closures.

Online casinos emerged as a bright spot for operators to keep players engaged and produce record-breaking revenue less than a year after debuting in Pennsylvania. Slots and table games brought in a an all-time high $37.8 million in April.

It easily shattered March’s record of $21.1 million. As a result, online casino tax revenue more than doubled month-over-month, from $8.1 million to $16.5 million.

Pennsylvania slot and table games total revenue and taxes

 Slot machine revenueSlot tax revenueTable games revenueTable games tax revenue
January 2020$190,311,646$98,376,146$72,553,994$11,651,223
February 2020$199,666,274103,042,963$77,426,025$12,441,810
March 2020$87,562,756$45,212,087$33,105,591$5,322,528
April 20200000

Sports betting loses out on possible record-breaking months

Total gaming revenue is composed of:

  • Slot machines
  • Table games
  • iGaming
  • Retail and online sports betting
  • Fantasy contests
  • Video game terminals

Since brick-and-mortar casinos are closed, slot and table games are unable to generate revenue. Major sports leagues have been on a corona-caused hiatus since March 12. Although ninety percent of wagers are placed online in Pennsylvania, there is a limited menu of sports (i.e. – Belarussian soccer, table tennis, futures bets) to choose from.

During an AGA webinar last week, Clark said:

“The past few months should have been record-breaking for legal sports betting in America. New markets were opening and those that legalized last year were coming online. I think you would have seen a continued appetite for sports betting. I don’t think the interest in sports betting ever waned. As sports come back, you’ll start to see more people engage.”

Will COVID cause more online casino legalization?

Online casinos launched in Pennsylvania in July 2019. Currently, there are 10 online casinos in the state. Revenue has increased month-over-month, but it hasn’t been enough to plug the huge void left by a complete brick-and mortar shutdown.

However, it has provided an alternative for players and in early March, Dr. Christopher Drumm, of Einstein Healthcare Network and co-host of the Doc and the Deacon podcast, said it was a safer alternative:

Whether or not the coronavirus and stay-at-home orders provide the impetus for other states to legalize iGaming remains to be seen.

In an interview with Play Pennsylvania, Clark said:

“It has provided revenue and opportunity for operators to continue to engage consumers through this difficult time and offer people who want to gamble a change to do it safely. It is a unique opportunity only a handful of states offer but the revenue is relatively small comparable to brick-and-mortar. There is careful considerations that need to be made in every jurisdiction.

Our focus has been on responsible gaming and it plays into the discussion about all gaming and ensuring the experience is a positive one. During any consideration of online casinos, we will be making sure responsible gaming is central to those discussions.”

Pennsylvania online casinos 2020 revenue and taxes

 Total revenueTotal tax 
January$13,957539$4,966,229
February$19,490,815$6,777,815
March$24,265,820$8,574,877
April$43,067,881$17,271,366

“Massive” tax implications for PA

Total tax revenue generated collectively through all forms of gaming and fantasy contests by PA’s 12 casinos in 2020:

  • January: $124,106,057
  • February: $124,915,295
  • March: $62,183,897
  • April: $18,334,503

Pennsylvania taxes slots at 54% and table games at 16%. It’s a much higher rate than New Jersey that taxes at a rate of 8% for both.  

Where do taxes collected from Pennsylvania casinos go?

For every dollar produced as revenue from slots, 54 cents is returned to Pennsylvanians. According to the Pennsylvania Gaming Control Board, the lion’s share is used to fund general school property tax reduction or wage tax reduction.

  • 34%: Property tax relief
  • 11%: horse racing industry
  • 5%: Economic development and tourism fund
  • 4%: Local and county government share

The 16% tax rate for table games is lower due to the overhead cost associated with operating them. The majority of the tax revenue collected from table games goes to state and local governments general funds.

Eighty days (and counting) of casinos closures will cause lasting damage.

Said Clark:

“The tax implications are massive. Communities across the state will feel the shortfall in gaming revenue. It’s not just going to be in the areas around the casinos. The impact is going to be far-reaching. It will have a long and lasting impact on our industry and the people who rely on us.”

Senator calls to divert sports betting revenue

Sen. Doug Mastriano introduced legislation that would temporarily divert sports betting revenue to the property tax relief fund. Mastriano says it will help homeowners deal with financial difficulties related to the coronavirus.

At 36%, Pennsylvania’s sports betting tax is the highest in the country. From its start in December 2019 through February 2020, the state has collected over $41 million in tax revenue from sports betting. Sports betting revenue currently goes into the general fund.

“Pennsylvania homeowners already face high property taxes, and the COVID-19 pandemic will only worsen that reality,” Mastriano said. “With a mandated shutdown of businesses that are not ‘life-sustaining,’ many Pennsylvania families find themselves out of work with no income, and have voiced concern about paying their property taxes.”

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Katie Kohler

Katie Kohler is a Philadelphia-area based award-winning journalist. She covers the Pennsylvania gambling industry with an emphasis on sports betting, online casino/poker and the lottery.

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