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Pennsylvania is entering critical budget negotiations ahead of the deadline on June 30. Governor Josh Shapiro has proposed to tax skill games, and this proposal is fast becoming one of the most debated elements of his %51.5 billion fiscal plan. Shapiro pitched the plan as a means to raise millions in revenue to fund education, transit, and public projects in the state, but the proposal has received significant resistance from lawmakers, business owners, and industry stakeholders.
At the center of the debate is the proposed 52% tax rate, which matches those of traditional slot machines. Shapiro wants to apply this rate to the 70,000 unregulated skill game terminals in Pennsylvania. These games often require players to perform tasks or exercises of hand-eye coordination to win, and have thrived in the legal gray area. The governor argues that taxing these types of gambling games would serve to regulate them and ensure fairness, while contributing positively to the state’s revenue.
Supporters of the proposal state that it will bring oversight to an untaxed industry. However, others are arguing that the rate is excessive and will place undue financial burdens on small businesses that rely on skill game machines to boost income. For many Pennsylvanians, these skill games offer a more social alternative to regulated online gambling, like slot play for real money, which has significantly contributed to Pennsylvania’s budget through tax revenue.
According to Shapiro’s budget address in February, the plan aims to generate $292 million in the coming fiscal year through a 52% tax on skill game terminals. These machines are commonly found in bars, clubs, restaurants, and convenience stores, and are unregulated and untaxed despite their popularity and profitability.
“There are 70,000 unregulated skill game terminals all across Pennsylvania,” Shapiro said during his budget address. “We need to take some of the money going into those slots and put it in our state coffers.”He continued, “These machines have no quality control for customers who are using them.”
The proposal calls for the Pennsylvania Gaming Control Board (PGCB) to oversee and regulate these machines. According to Executive Director of the PGCB, Kevin O’Tool, “It is the board that is the only agency in the Commonwealth with the ability and experience and knows how to regulate slot machine activity.” This oversight mirrors regulations already in place for online gambling, sports betting, and casinos.
Shapiro’s administration has tied his tax to major investments in mass transit and public education. His plan predicts $1.5 billion in transit funding over the next five years, supporting 52 regional transit systems and increasing access to riders in rural, urban, and suburban areas.
The proposed tax rate has garnered strong vocal opposition from both sides, especially Republicans in the state Senate. Critics of the plan argue that the 52% rate is excessive and also does not reflect the smaller profit margins of skill games compared to traditional slot machines.
Senator Gene Yaw, who proposed taxing the machines at a much lower 16% in Senate Bill 706, said, “I almost laughed at that. At a 52% tax rate, they don’t have to worry about skill games. Nobody will put them out. No operator will. There’s no way that they can make a profit on them.” Yaw is proposing regulatory oversight through the Department of Revenue, not the PGCB.
Senator Chris Gebhard has also introduced a bill, Senate Bill 756. This bill calls for a 35% tax rate and PGCB oversight. Although it is closer to Shapiro’s proposal, it shows the skepticism of a 52% figure.
Many small business owners are voicing their concerns. Skill games provide supplementary income for corner stores, veteran halls, and mom-and-pop bars in economically struggling areas.
Lawmakers have accused the PGCB of being too closely aligned with the interests of large casinos, and that the skill games should not fall under their oversight. Yaw said, “The lottery is under the Department of Revenue, and that’s where we would propose to put skill games.”
The June 30 budget deadline is looming, but Shapiro remains firm in his 52% tax rate, claiming that it is justified and necessary to contribute to public projects in Pennsylvania.
However, for many lawmakers and community members, the rate threatens to overthrow a young gaming ecosystem that has been able to grow without state support or interference.
The legislature seems to be divided. The House, controlled by Democrats, is largely supportive of the governor’s budget. However, the Republican-led Senate remains a hurdle, especially in relation to gaming taxes.
It remains to be seen whether a compromise can be reached.
