Tax grab: Pa. gambling plan drives casino stock down

Redrawing America Imbalance of Power
Pennsylvania State Capitol in Harrisburg, where lawmakers are trying to boost taxes on gambling and other vices.

It’s no secret that Gov. Wolf and most of the Republicans who run the General Assembly, like their recent predecessors of both parties, want Pennsylvanians to drink more booze, gamble more, and smoke more so state government can grab more alcohol, gambling and cigarette (and eventually pot) taxes.

The idea is to get the citizens to spend more on highly taxed betting, drinking, and smoking — so the government can finance its underfunded teacher pensions, pay debt service on continued expansion of its prison and college systems (despite declining numbers of Pennsylvania prisoners and college students), patch aging roads, and pay other rising costs, all without boosting unpopular income or sales taxes.

You might think Pennsylvania politicians’ loving embrace of things that are bad for us might at least be good news for the state’s organized gambling industry.

Nope. Shares of Penn National Gaming — the Wyomissing-based publicly traded company that owns Hollywood Casino and Penn National horse-racing track near Harrisburg, offtrack gambling halls in York and Lancaster, plus out-of-state casinos from New England to Las Vegas — fell nearly 3 percent, to $24.66, following the Pennsylvania General Assembly’s passage of a plan to allow “unprecedented expansion of gambling,” as stock analyst Steven M. Wieczynski put it in a report to clients of brokerage firm Stifel Financial.

In a conference call with Penn National bosses, Morgan Stanley gambling analyst Thomas Allen asked why executives of existing Pennsylvania casinos opposed the expansion. The law would allow new video gambling sites within 25 miles of the state’s dozen licensed casinos, unwelcome competition for an industry already expanding in neighboring states. And the plan levies “a 54 percent tax on iGaming, which is completely unprecedented,” said Eric Schippers, the Penn National executive who has led the company’s effort to convince legislators to protect existing casinos and curb new competition.

Despite the fact the budget has been debated for months, the gambling language was rushed to a vote, so “rank-and-file legislators honestly didn’t know what they were voting on,” Schippers told investors. He hopes the state House will revise the plan to limit competition and protect existing gambling jobs and owner profits: “We’re hoping that cooler heads will prevail.”

But, of course, that would defeat the purpose of the proposal, which is to get Pennsylvanians to bet more so the government can grab their losses.

Schippers also gave this insight on why it takes the Republican legislators and Democratic governor so long to cut a deal: “Frankly, the House and Senate didn’t want to cede the authority to the governor to solve the budget crisis on his own. So there was this sense of ‘Let’s just pass something quickly.’ ”

If the House ends up approving the whole 970-page bill, “we’re going to have to figure out where we go from here,” he told investors. Even if it passes, local communities around each casino — home to gambling workers, executives, and contractors — “would have the option of opting out,” keeping truck-stop betting machines and other competition in the next county, at least.

Penn National had been trading at record levels, as its casinos and gambling sites, in a network stretching from New England and Las Vegas, have raked in larger bets from more-confident American consumers. Beyond the Pennsylvania threat, the company told investors that its Tropicana casino hotel in Las Vegas has reported a 35 percent increase in fall cancellations after a gunman killed 59 country music fans and others Oct. 2 from his room at another hotel.