- The Washington Times - Wednesday, September 28, 2011

PHILADELPHIA — As more states roll the dice on casinos, the traditional pecking order of American gambling is being turned on its head.

Just five years after its first casino opened, Pennsylvania now generates more tax revenue from card games and slot machines than any other state in the nation — and it isn’t even close.

The Keystone State’s treasury raked in more than $1.3 billion from its 10 casinos last year, outpacing its closest competitors Indiana and Nevada, which saw $875 million and $835 million, respectively. Louisiana and New York round out the top five.

New Jersey, the longtime powerhouse of Northeast gambling, now ranks only 10th, with $306 million in tax revenue, according to the American Gaming Association.

Since 2006, casino taxes and licensing fees in Pennsylvania have generated $5.4 billion. Nearly 15,000 jobs have been created at the state’s gambling hot spots, which include Parx Casino just outside Philadelphia, Hollywood Casino in rural Dauphin County near the state capital of Harrisburg, The Rivers Casino in Pittsburgh, and Mount Airy Casino Resort, tucked away in the Pocono Mountains.

Ending an exodus

Like in other Northeast states that have watched in frustration as residents cross the border to spend their discretionary income, Pennsylvania lawmakers eventually grew tired of watching hundreds of millions of dollars leave the state each year. Many gamblers headed east to Atlantic City, N.J. Others drove to West Virginia, where commercial gambling was legalized in 1994. Some boarded planes for the bright lights of Las Vegas.

Each year, one out of every 12 Pennsylvanians left the state to gamble. That exodus, coupled with tight state budgets, helped reframe the debate and win over longtime opponents.

“I think people are getting realistic, just as I was realistic,” said then-Pennsylvania Gov. Edward G. Rendell, whose spirited support of commercial gambling helped drive casino legalization through a skeptical state legislature in 2004.

In 2002, Mr. Rendell, a Democrat, campaigned on bringing casinos to the state as a way to create jobs and lower crippling property-tax rates. Like other proponents, he doesn’t dispute the negative effects casinos can have on problem gamblers and their families.

“If I could stop people from gambling, if I had the power to do that, maybe I would. But Pennsylvanians were already gambling,” Mr. Rendell said. “Why weren’t we getting any of the benefits of that?”

The key to Pennsylvania’s meteoric rise has been its 55 percent tax rate on slot-machine revenue, one of the highest in the nation. The state also levies a 16 percent tax on table games. Nevada and New Jersey, in comparison, tax gaming revenue at 6.75 percent and 8 percent, respectively. They each draw more visitors and generate far more gross gaming revenue, but the low tax rates mean greater profits for casino owners and less money for state accounts.

N.J.’s shrinking chip stack

But in the gambling world, there’s always a loser, and Pennsylvania’s success “has been at the expense of Atlantic City in many ways,” said Frank J. Fahrenkopf Jr., president and CEO of the American Gaming Association.

The economic recession and rise of Pennsylvania casinos formed a perfect storm, eating away at Atlantic City’s share of the gaming market it used to dominate.

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