Pennsylvania, despite being the second-richest regulated state in commercial gaming, has beaten Nevada, New York, and New Jersey when it comes to tax revenue. The gaming taxes in Pennsylvania reached nearly $2.3 billion last year - making it the highest tax revenue the nation has ever collected.

Pennsylvania has solidified its reputation as a gaming tax powerhouse in 2023, collecting nearly $2.3 billion in gaming taxes - the highest figure of any state in the United States. This substantial revenue, as highlighted in the American Gaming Association's State of the States 2024 report, showcases Pennsylvania's dominance in leveraging legalized gambling to benefit public coffers.

Harrisburg outpaces gaming capitals

While Atlantic City and Las Vegas are often celebrated as the epicenters of US gaming, it is Harrisburg, Pennsylvania's capital, that reaps the largest financial rewards. Despite trailing Nevada in gross gaming revenue - $5.86 billion versus Nevada's staggering $15.52 billion - Pennsylvania's high tax rates ensure the state collects far more revenue than the Silver State. Nevada's gaming taxes totaled approximately $1.2 billion in 2023, less than half of Pennsylvania's earnings.

Pennsylvania's impressive haul is driven by some of the highest gaming tax rates in the nation. Statewide, 52% of net slot machine revenue at brick-and-mortar casinos goes directly to the state, while table games are taxed at 16%. In the world of online gaming, 54% of slot revenue is earmarked for state purposes since Pennsylvania is one of only seven states with legalized iGaming. Additional contributions come from slot-like video gaming terminals at truck stops, taxed at 52%, and sports betting operations, which allocate 36% of their revenue to the state.

These elevated tax rates led to a 10.6% year-over-year increase in Pennsylvania's gaming tax revenue, marking the state's most profitable year on record.

Skill machines pose a challenge

Despite these achievements, Pennsylvania's gaming industry faces challenges from unregulated skill gaming machines. Often referred to as "Pennsylvania Skill," these devices resemble standard slot machines but require players to identify winning paylines by tapping the correct symbols. Critics argue these machines get revenue from regulated casinos, costing the state's licensed operators hundreds of millions of dollars annually in lost slot revenue.

Brick-and-mortar casinos and gaming industry advocates continue to urge the state to crack down on these unregulated terminals, saying that stronger enforcement would further boost tax revenue and support the regulated market.

How Pennsylvania invests gaming revenue

The $2.32 billion collected in 2023 plays a vital role in funding various state initiatives. Gaming revenue in Pennsylvania is allocated to reduce homeowners' property taxes, bolster the state's agricultural sector, give support to the horse racing sector, and finance economic development grants.

Since the inception of regulated gaming in 2006, casinos in Pennsylvania have also contributed over $213 million to responsible gaming programs and charities.

The gaming sector is also a significant employer in Pennsylvania, with nearly 16,000 workers employed statewide. Of this workforce, 85% are state residents. Furthermore, Pennsylvania has made strides in promoting diversity within the industry: over a quarter of managers and higher-level employees are racial minorities, and women represent nearly 40% of leadership positions.

Pennsylvania outshines other states

While Pennsylvania leads the nation in gaming tax revenue, other states also posted notable figures in 2023. New York ranked second, generating $1.83 billion in taxes from $4.22 billion in Gross Gaming Revenue. Its contributions stemmed from four commercial casinos, off-track betting sites, racinos, and online sports betting. New Jersey followed with $691.8 million in taxes, supported by nine Atlantic City casinos, sports betting, and iGaming.

However, Nevada, the state synonymous with gambling, collected only $1.2 billion due to its relatively low 6.75% effective tax rate on all forms of gaming revenue.

With its robust tax structure, inclusive workforce, and commitment to community reinvestment, Pennsylvania continues to set the standard for how states can benefit from legalized gambling. As the gaming landscape evolves, the Keystone State's model serves as a blueprint for maximizing economic returns while supporting its residents and communities.