[caption id="attachment_6106" align="alignright" width="250"] Increased taxes on the Sands Bethlehem is one of several reasons LVS sold the casino to Wind Creek Hospitality.[/caption]
A proposed tax on promotional credits in the State of Pennsylvania could be cost the Bethlehem Sands Casino millions of dollars a year. The Sands Casino is the most aggressive user of promotional credits of all Pennsylvania casinos.
One of the reasons Sands Casino attracts so many out-of-state gamblers is their use of free slot machine money they give away. They provide thousands of plastic freebie cards each day.
The Current Slots Money Program
In years past, the free slot machine money has had a tax break. No one takes advantage of the tax break more than Sands Bethlehem. Richard McGarvey, the Pennsylvania Gaming Control Board's spokesman, said of the promotional credits, "No one else is even close. Sands' use of promotional play as a marketing tool has led all casinos since they opened in 2009."
In Gov. Tom Wolf's proposed 2016 budget, he hopes to collect an additional $51 million a year from the state's casinos by closing that tax loophole. Of that $51 million, the Sands Bethlehem would contribute nearly $12 million to the budget.
How the Tax Could Lose the State Money
The problem with such a tax is it's negative. If the plastic cards are taxed, then the Bethlehem Sands is not likely to use them as much. The projected tax increase by Governor Wolf therefore will never be realized.
The benchmarks on Wolf's tax proposal will not be reached. The end result will be Bethlehem Sands and other state casinos are likely to lose a key promotional and advertising mechanism, which will lead to fewer revenues at the casinos. Thus, taxes will be reduced in two ways, so the tax increase is unlikely to meet the needs of the state.
It is possible that Gov. Wolf is right and the Bethlehem Sands and other casino will continue to market themselves with the free slot machine cards, despite the tax. It is a matter of faith that raised taxes are going to have no impact.
2015 Ohio Promotional Credit Bill
Pennsylvania is not the first state to consider taxing promotional credits. In Ohio, State Senator Bill Coley, R-Liberty Township, proposed applying Ohio's 33% tax rate to promotional gaming. That led executives from Pennsylvania-based Penn National Gaming to criticize Sen. Coley.
Penn National owned four casinos in Ohio at the time (April 2015). Eric Schippers, Penn's SVP of Public Affairs, told The Cincinnati Enquirer, "This proposal is ill-conceived and misguided. Eliminating or reducing the discount on promotional credits would nullify one of the very weapons the state needs to help keep Ohio competitive in the ongoing regional gaming arms race.""Ironically, the legislatures in both Indiana and Pennsylvania are currently crafting casino incentive legislation primarily to help their gaming industries compete with Ohio."
That was then and this is now. Despite the words of Eric Schippers some 10 months ago, it appears that Pennsylvania is going to go down the same route Ohio took. Again, Tom Wolf would not be the only governor to see the wisdom in higher taxes on promotional credits.
2013 Colorado Casino Credit Policy
In 2013, the Colorado Gaming Commission gave a 5% tax break on casino credits to 40 different Colorado-based casinos, on the grounds such a tax break would lead to more visitors and thus more tax revenues. Colorado Gov. John Hickenlooper was displeased enough with the decision that he dismissed all 5 commissioners and instated 5 replacements.
Thus, the casino tax credits have been a controversial top nationwide. The debates cut across party lines, as liberals and conservatives are not sure which side to take. In many cases, Republicans call for more taxes on casinos, while Democrats call for tax breaks for these businesses. Anyone familiar with American politics knows that is not the usual order of business.
Governor Tom Wolf's Strategy
The Pennsylvania governor's tax strategy is likely to be passed in one form or another. Enough dissent exists that the bill will not be an easy sell, though. With the legislature in the hands of the opposition party, expect to see the level of taxation decrease to a more acceptable level.
In the end, if Bethlehem Sands and other state casinos believe the slot machine money will drive more revenues in than they'll lose in taxes, they are likely to continue the policy. It becomes a matter of finding an acceptable level of taxation.
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