Articles

(July 2003) It’s quite a challenge deciding how much to depend on gambling receipts for education funding and property tax reduction in Pennsylvania. There are many vested interests, differences in philosophy and culture, history, campaign promises, and strong feelings about taxes. IssuesPA identified some of the entities "in the mix."

Property taxes, Pennsylvanians, history, Governor Rendell...

• Many hate property taxes even though Pennsylvania’s reliance on them is relatively low. Pennsylvania ranks 31st among 50 states and the District of Columbia, and is 7.5% below the national average. Unlike many states, Pennsylvania exempts tangible personal property - such as machinery and equipment, inventories and cars - from the tax base. And Pennsylvania allows local governments to levy their own income taxes, reducing their dependence on property taxes. The property tax is the one tax that still can be raised - and regularly is - by most school districts. Yet it’s only tangentially related to a person’s ability to pay or to services received.

• In poll after poll, Pennsylvanians say they believe their taxes are too high. What’s needed? A fundamental overhaul of the state’s tax system. The message to elected officials? Reduce the property tax and replace lost revenue by other means such as higher taxes on cigarettes or new taxes on gambling revenue, which affect a relatively small proportion of citizens.

• For decades, Pennsylvania’s policymakers sought to decrease property taxes. While details of plans differed, the quest has been the same - use increased income tax revenues to replace property tax proceeds. But history hasn’t been kind to tax reform. Pennsylvanians haven’t been enthusiastic about exchanging one tax for another.

• In 2002, gubernatorial candidate Edward Rendell said he’d increase state support of public education and reduce property taxes by, among other actions, placing slot machines at Pennsylvania’s existing four racetracks. A Penn State University study projected $283 million in revenues from 1,500 slot machines at each of those locations. Last March, Governor Rendell advocated sending $1.5 billion in new state funding to local school districts for property tax relief, funded mostly by tax revenue from approximately 24,000 slot machines at Pennsylvania’s four existing and four new racetracks, and supplemented by an increase in the state’s personal income tax.

...the legislature, school districts, horse racing, gamblers...

• The legislature basically is united in its reluctance to raise broad-based state taxes for any reason, including property tax reduction. However, the legislature isn’t united on gambling as a significant source of new revenue. In early July, the Senate narrowly passed a bill to raise approximately $350 million annually for property tax relief using revenue from slot machines at the existing four racetracks, and another $500 million at four more. In mid-July, the House, with the Governor’s approval, comfortably passed legislation to use slot machine revenue from as many as 9 racetracks and 2 non-track betting parlors, as well as revenue from a 0.1 percent local income tax increase, to reduce property taxes by $1 billion. The measures further direct additional tens of millions of dollars to other uses. The next step? Reconciling the House and Senate bills. Easy to do? Hardly.

• For decades, Pennsylvania’s 501 school districts have relied increasingly on property taxes. State government’s contribution to basic education costs dropped from 50% in the early 1970s to 35% today. The result? Insufficient funding for basic necessities in some districts, inequity in school district resources, and outraged citizens demanding relief from property taxes in nearly all districts.

• Horse racing in Pennsylvania supports about 35,000 jobs and generates $752 million in economic activity. Although Pennsylvania has 21 off-track wagering facilities in addition to the tracks themselves, the industry says it’s been hard hit by slot machines at West Virginia and Delaware racetracks. The industry wants the legislature to "level the playing field."

• A 2002 study conducted for Harrah’s estimated 2 million of Pennsylvania’s 8,842,000 adult residents each made an average five trips outside Pennsylvania annually to gamble. About 85% of those trips were to surrounding states, mostly to Atlantic City, New Jersey. If Pennsylvania gamblers are typical, slots are their favorite game, accounting for 72% of games played.

...volunteer fire companies, Pennsylvania Convention Center, and more!

• The House and Senate measures propose more destinations for gambling tax revenues. Among them - the Department of Revenue for administering the tax, volunteer fire companies, a compulsive problem gambling treatment fund, the Department of Community and Economic Development, a new Gaming Board, and host municipalities. The House bill adds gambling tax revenues for the Southwest Regional District, Pennsylvania Convention Center in Philadelphia, and the Sports and Exhibition Authority serving Pittsburgh and Allegheny County. The grand total of distributions from state tax proceeds before money is allocated for property tax reductions? An estimated $80 to $100 million -- annually.