Tax Revenue from PA Online Gambling Down 22%?

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The news came from the Philadelphia Inquirer that Casino revenue fell down significantly over the last year. And, while that might be true, the question is if tax revenue from PA online gambling fell at all?

Despite many doomsayers applying the issues connected with the 2020 pandemic with the state’s decision from July 2019 to legalize online gambling, that is the furthest thing from the truth.

If we watch the numbers for Pennsylvania, everything becomes clear:

  1. Total casino revenue is down 42%
  2. Casino tax revenue is down 22%
  3. Online gambling is up 1688%

Even though these statistics might be misleading because the timeline is so short and it might be a primary explosion in business, there is no doubt that online gambling didn’t suffer during the pandemic and the subsequent lockdowns.

And, if we include other numbers, including those for online sports betting and daily fantasy sports (DFS), we are reaching an even higher number that might have been the reason why Pennsylvania, even with reduced tax revenue, didn’t suffer as bad when it comes to full time and part-time employment as many other states.

Lockdowns for Terrestrial, an Opening for iGaming

Even though the industry in Pennsylvania is well diversified, the impact lockdowns had on business was significant. Even in the casino and gambling industry, the loss of revenue, jobs, and indirect commerce to the area did impact the economy and, subsequently, the tax revenue.

With the income for the gambling industry as a whole falling 42%, the loss hasn’t only impacted the business and their employees. The loss of revenue and wages directly impacted both consumer spending and other purchases, affecting the economy in general.

But, the issues with terrestrial gaming not only haven’t affected the cyberspace market but are probably one of the reasons why it is booming so much. Avid gamers who frequented the brick and mortar establishments were forced to try out online gambling even if they haven’t started as fans.

Additionally, due to the advancements in online gambling, these players were happy to stay on the platforms and keep on gambling. By using an expert guide for Pennsylvania online gambling it is easy to find acceptable or even welcomed solutions for those who prefer this type of entertainment.

Lower Tax Impact in New Jersey

Most media outlets compared the loss of tax revenue and the reduction of gambling overall between New Jersey and Pennsylvania, with the former suffering much lower losses.

While on the surface these two neighboring states look quite similar, there is a key difference, especially in their casino markets.

Namely, because New Jersey adopted online gambling and online sports betting much sooner, most of the potential players already switched to this option well before the pandemic and lockdowns.

Now, because of the former consolidation, the rise of the online gambling market in NJ was not as spectacular as it was in Pennsylvania. But, due to the size and portion of the online market, the losses experienced with closing down terrestrial locations were not as substantial.

Operators Scrambling to Go Digital

As the uncertainty grows about how much the whole situation with people needing to stay indoors and businesses closing, gaming operators as well as other important services, are scrambling to switch their business focuses to digital as soon as possible.

Since the legalization, when three online operators were working from the beginning, ten more platforms were opened. This brought the total number of online offers for gambling operators up to thirteen. Now, there is a visible rise in companies that are exploring the option to enter the race.

Fears about the market being saturated are legitimate, but also premature. Currently, it doesn’t seem that the limit to how many PA-based players are interested in playing online.

Additionally, unlike brick and mortar casinos, the online option has much lower overhead costs and is better scalable as the business rises, lowering the level of entry to the industry.

Higher Taxes might be Stippling Business

Pennsylvania might have a liberal standpoint when it comes to casinos and gambling, but it also taxes entertainment very severely. With the tax rate of 52%, more than half of the profit from gambling goes directly into the coffers of the state budget.

Combined with the restrictions and requirements proposed to open physical establishments again, these high taxes might be doing more harm than good. Restrictions on the number of people, distance, and other measures lower the maximum possible amount of players staying inside.

This is a lesser issue for the southeastern neighbor of New Jersey where this tax rate is 8%, leaving investments in the business much more lucrative even with restrictions.

Finally, the lower overhead of online gambling and the easy scalability to millions of players if necessary means that such an investment can’t be beaten mathematically. But, there are still some that would prefer to throw cards in person.