July 26, 2010--Nevada's got far more slot machines and table games, New Jersey has more casino workers and even Iowa has nearly twice as many casinos, but there's one place where Pennsylvania gambling industry is king: taxes.

Pennsylvania collected more taxes from its casinos than any other state, passing Nevada for the first time, fiscal 2009 revenues show.

Perhaps most impressive is that the nearly $1.1 billion collected last year by Pennsylvania came from just nine casinos, while Nevada collected nearly a quarter-billion less from its 260 gambling halls.

"It is pretty amazing, but not unexpected," said Richard McGarvey, spokesman for the state Gaming Control Board. "Our tax is so high because the intention of the gaming law was to bring in tax money."

Whether that's good or bad depends on who is doing the grading. Gov. Ed Rendell has argued that gambling revenues not only have transformed the state's once-sagging horse racing industry into one of the nation's highest-paying and helped balance the budgets of the communities that host the casinos, but $770 million was used last year to give taxpayers a reduction in their school taxes. The reduction saved the typical taxpayer about $190 per year, and senior citizens get an even bigger break, said Gary Tuma, a spokesman for Rendell.

Not everyone is a fan. Matt Brouillette, president of the fiscally conservative Commonwealth Foundation, sees it as politicians spending money lost by middle- and low-income gamblers. "All this did was create a windfall that feeds the state's insatiable appetite to spend," he said.

There's no denying that when it comes to casino taxes, Pennsylvania has distinguished itself. Pennsylvania was able to surpass Nevada partly because while the recession caused Nevada's tax revenues to fall by 10 percent over 2008, new casino openings in Pennsylvania caused its casino tax revenues to increase by 21 percent.

Still, having the Keystone State eclipse Nevada in any area of gambling came as a surprise to Nevada Gaming Control Board officials.

"Really? That's incredible," said Mike Lawton, senior researcher for the Nevada board, when told his state had been dethroned. "You guys must be charging a whole lot of money to run a casino there."

Precisely.

Pennsylvania is now the casino tax capital of the nation primarily because its casinos pay one of the highest tax rates in the nation. So, while casinos pay roughly 8 percent tax on gross casino revenues in Nevada, and about 9 percent in New Jersey, Pennsylvania casinos give the state 55 percent of all the money left in their slot machines.

And there's no indication Pennsylvania will relinquish its perch anytime soon. Even if the economy picks up fast and Nevada regains its pre-recession tax take of $1 billion, collection on new table games (and a new casino to open in Philadelphia in September) will keep Pennsylvania casino taxes climbing. Table games alone are expected to bring in $320 million a year.

The upside is that it's helped the state reduce property taxes and balance a state budget in a bad economy. The downside, say analysts, is that it will prevent casinos from investing as much to build and update their properties. Sands Casino Resort Bethlehem executives earlier this year said if they had to do again, the company likley would not invest so much in a market with such a high tax rate. It certainly will not do it in the future, they said.

Maryland had difficulty finding bidders for its soon-to-be built casinos largely because its tax rate is set at a nation-high of 67 percent.

Analyst Grant Govertsen said it's a balance of jobs and investment versus tax dollars.

"A higher tax rate brings in more money, but that usually means fewer jobs and less capital investment," said Grant Govertsen, co-founder of Las Vegas-based Union Gaming Group, analysts for the worldwide gaming industry. "Most of the recent jurisdictions that have approved gaming have opted for the high tax rate."

Just like Pennsylvania.

"The [gaming] law was designed to raise money that people were taking into other states," Tuma said. "Obviously, it's doing its job very, very well."

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Casino Tax Kings

These states collect the most taxes from their casinos.

State Taxes collectedNo. of casinosTax rate

Pennsylvania$1.080 billion in taxes9 casinos 55% tax rate

Indiana$878 million in taxes13 casinos31%* tax rate

Nevada$831 million in taxes260 casinos8% tax rate

Louisiana$598 million in taxes18 casinos24%* tax rate

Illinois$495 million in taxes9 casinos35%* tax rate

Missouri$469 million in taxes12 casinos21% tax rate

New York $455 million in taxes 8 casinos 65% tax rate

West Virginia $408 million in taxes4 casinos57% tax rate

New Jersey$348 million in taxes11 casinos9% tax rate

Source: American Gaming Association, Pennsylvania Control Board

*Average tax rate in communities where the rate has a range.

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