As Pennsylvania struggles with state pension plan funding and other budgetary challenges, one of its revenue streams – tax collections from casinos – could take a serious hit next year as a result of the so-called fiscal cliff.
Boise, Idaho (PRWEB) November 29, 2012
As Pennsylvania struggles with funding of its state pension plans and other budgetary challenges, one of its revenue streams – tax collections from casinos – could take a serious hit next year as a result of the so-called fiscal cliff and the economic baggage that may come with it, according Martin R. Baird, a casino consultant and chief executive officer of Robinson & Associates, Inc., a guest service consulting firm to the global gaming industry. Baird has announced three aspects of the “cliff” that could push Pennsylvania casinos over the edge.
“Pennsylvania’s state pension funds are staring a $41 billion shortfall in the face and their costs will devour 62 percent of fiscal 2014 revenue growth, according to the state budget office and a Bloomberg news story,” Baird says. “Charles Zogby, Pennsylvania’s state budget secretary, said in a statement that the state may have to choose between ‘fully funding pension obligations or making cuts to the core functions of government.’
“The last thing Pennsylvania needs is a drop in casino revenue, but gaming properties could suffer a catastrophic blow from three major factors coming out of the fiscal cliff.
These factors are federal tax increases, state tax increases and increased competition. Simply put, when taxes go up, people have less to spend. When competition increases, they have more places to spend the little money they have left. That would translate into hard times for casinos in the very near future.”
Federal Taxes. If President Obama and Congress cannot reach an agreement on the fiscal cliff, federal taxes on almost all Americans will increase, Baird says. “The payroll tax holiday will come to an end,” Baird says. “Washington is talking about reducing the mortgage tax deduction, shifts in the alternative minimum tax that would take a larger bite and starting the death tax at $1 million. The Congressional Budget Office sees the potential for a recession in 2013 with all these changes.”
When hard-working families in Pennsylvania are forced to send more money to Washington, they will have fewer dollars to spend on entertainment, Baird says. “Casinos are part of the entertainment industry and customers with a thinner wallet will either spend less on the casino floor or not show up at all,” Baird adds.
Pennsylvania’s farm families could be hard hit, Baird says. “They could really suffer because Congress is looking at higher taxes on people making over $250,000 a year and lowering the death tax to estates of $1 million,” Baird says. “Add the potential of higher taxes on dividends to those two changes and one of the most important groups to the casino industry – seniors – also would be significantly impacted.”
State Taxes. Federal spending cuts are also part of the fiscal cliff and that would mean less money for states, according to Baird. “This means that states will need to increase revenue from other sources,” Baird notes. “Casinos have a giant bull’s-eye on their back when it comes to taxes. Sin taxes are always the easiest ones for politicians to pass. When looking around for new revenues for education and social services, it wouldn’t be surprising at all if legislators focused on casinos.”
Increased Competition. New competition is coming from other states in the region, Baird says. “Just this year, Ohio entered the casino market and three new casinos have opened there, along with a racino and thousands of slot machines and gaming tables. The challenge is that many states now allow casinos and that means less revenue for states like Pennsylvania. The competition is coming from virtually all sides geographically as a result of states scrambling to increase revenue.”
So what can casinos do?
“Casino executives have little to no control over these looming problems,” Baird says. “But they do have control over the products and services they offer, and now is the time for them to take a hard look at those areas so they are prepared for whatever decisions the president and Congress make.
“When it comes down to it, casinos that have great service and offer an amazing gaming experience will make it through the hard times. With 20 years of casino consulting experience, our company has never seen anything like this and casinos better take action now if they want to survive.”
Robinson & Associates has created a presentation on the fiscal cliff. To obtain a copy of the presentation, contact Lydia Baird, director of business development, at 208-991-2037 or firstname.lastname@example.org.
Martin R. Baird is a casino consultant and chief executive officer of Robinson & Associates, Inc. For 20 years, Robinson & Associates has been dedicated to helping casinos improve their guest service so they can compete and generate future growth and profitability. A Boise, Idaho-based consulting firm to the global gaming industry, Robinson & Associates is the world leader in casino guest experience measurement, management and improvement. Recently, it announced Simply Share, a real-time customer feedback platform that makes it fast and easy for casino customers to share their experience directly with casinos instead of posting comments online at social media sites.
For more information, visit the company’s Web site at http://www.casinocustomerservice.com or contact Lydia Baird, director of business development, at 208-991-2037 or lbaird(at)raresults(dot)com. Read about casino customer service improvement at Martin Baird’s blog at http://www.mbaird.blog.com. Robinson & Associates is a member of the Casino Management Association and an associate member of the National Indian Gaming Association.