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House of Representatives
Session of 2013 - 2014 Regular Session

MEMORANDUM

Posted: November 18, 2013 04:11 PM
From: Representative Rosita C. Youngblood and Rep. James Clay, Jr.
To: All House members
Subject: Gaming Privilege Assessment Fee -- legislative package
 
In the near future, we plan to introduce a package of three bills that would generate hundreds of millions of dollars in new revenue to help provide a quality education for Pennsylvania students across the state.

The proposals would allow Pennsylvania to remove the income tax exemption for State Lottery winnings, and levy a small fee on all gambling winnings collected on both residents and nonresidents of the Commonwealth.

We believe the proposals could raise as much as $500 million for educational programs that are critical to improving student achievement and building a stronger education system in Pennsylvania. One of the proposals creates the Public Education Improvement Fund, which would receive the revenue generated by a new gambling winnings assessment fee, and requires the money to be available to all school districts and used for educational programs.

As you know, the General Assembly is always looking for new revenue, and these proposals would not be a burden to consumers, the poor, small businesses, corporations, working families, or anyone relying on fixed incomes. They are not regressive in any manner, and would have no impact on the day-to-day lives of Pennsylvania's residents. Yet, they have the potential to raise enough money to provide a significant positive impact for our students.



Document #1

Introduced as HB1969

Description: This proposal, sponsored by Rep. Clay, would remove the tax exemption in the State Lottery Law relating to lottery  winnings. Current law specifies that lottery prizes must be exempt from any and all state and local taxes.

Pennsylvania is one of only two states in the nation that operates a state lottery and does not require winnings to be taxed at the state level (California is the other). This includes an exemption of lottery winnings to the state's Personal Income Tax. All other forms of gambling winnings, including winnings from casino gambling, pari-mutuel thoroughbred horse racing and harness horse racing , games of chance and Bingo, are subject to the state's 3.07 percent PIT.

As a result, Pennsylvania is losing out on a source of funding that is utilized by nearly every other state in the country that operates a lottery.
  View Attachment
 

Document #2

Introduced as HB1970

Description: This proposal, also sponsored by Rep. Clay, would remove the tax exemption in the Tax Reform Code relating to Pennsylvania lottery winnings. Currently, the Tax Code also specifies that Pennsylvania lottery prizes are exempt from the state's Personal Income Tax. All other forms of gambling winnings, however, are still subject to the 3.07 percent PIT.

Once again, as a result of this provision, coupled with the provision contained in the State Lottery Law, Pennsylvania is losing out on a source of funding that is utilized by nearly every other state in the country that operates a lottery.
  View Attachment
 

Document #3

Introduced as HB1968

Description: In addition to joining the majority of states across the nation in requiring lottery winners to pay state taxes on their winnings, the third proposal, sponsored by Rep. Youngblood, would enact an additional 5% Gaming Privilege Assessment fee on all gambling winnings. 
 
This proposal would require winners to pay the additional 5% fee on all gambling winnings, including lottery winnings, and would also be subject to those who live outside of Pennsylvania yet gamble within our borders. With casinos paying out nearly $28 billion in slot machine winnings alone last year, the Commonwealth could generate hundreds of millions of dollars for education statewide.

The bill would establish the Public Education Improvement Fund, which would receive the revenue generated by the new assessment.

Similar to federal law, winners would be able to write-off gambling losses against their assessed winnings, and the state would institute an automatic withholding of the fee when the winnings are $5,000 or more.
  View Attachment