Charles Potter – 2/22/09

This page was last updated on February 22, 2009.

What will state try to legalize next?; Charles Potter; Beaver County Times; February 22, 2009.

Below is a detailed critique of the subject letter.

“Gov. Ed Rendell wants to legalize video poker machines in bars and clubs, supposedly to fund his tuition relief plan.

“Although this does seem like a valid cause, how can we be sure that is how the money gained from this legalization will be spent? What happened to the windfall of tax relief we were supposed to see with the legalization of casinos in Pennsylvania?”

[RWC] Adding/raising taxes for a “tuition relief plan” is a “valid cause?” Where do people learn economics? Increasing subsidies for any good or service (in this case “tuition relief”) simply results in even more price increases. It’s akin to a dog chasing its tail. The way to get prices to come down is to eliminate the government subsidies so students pay for their education with their (or their parents’) own money, not someone else’s. Deserving students will still be able to get scholarships from private sources based on their academic achievement.

“I certainly have not seen it in my taxes. The casino owners are getting rich.”

[RWC] Assuming the “casino owners are getting rich,” what’s wrong with that? Isn’t that why they are in business?

“What is happening for the average taxpaying resident living in this state? Where does it end? What else do we legalize for the sake of tax relief or some other noble cause?”

[RWC] Mr. Potter appears to imply casino owners are getting some kind of break at the expense of “the average taxpaying resident.” The slot machine license fee for a casino is $50 million. Further, the tax is 55% of the difference between what was wagered and what was distributed as winnings (“gross terminal revenue”). That’s about five and a half times the rate of the corporate net income tax. Actually, it is probably even more because the gambling tax is really a revenue tax, not a “net income” tax. In other words, even if a slot machine licensee manages to lose money, it still owes tons of taxes.

“Adding money produced from gambling to our state coffers and political promises don’t not [sic] mix well together.”

[RWC] It’s not like this is something new. We’ve had the PA lottery around since 1971/1972 and harness racing was around before that.