The contentious debate in Pennsylvania over regulating skill games took a turn with Gov. Josh Shapiro's inclusion of a tax structure in his FY 2025/2026 budget proposal. The discussion about the machines, more commonly known as skill game machines, has been very heated, especially concerning their taxation and oversight.
While Shapiro and other lawmakers agree on the need for regulation, the tax rate remains the main sticking point. Shapiro advocates regulating skill games, once presenting a bill for that very purpose during his last budget address. His new proposal imposes a 52% tax rate, up from his previous 42% plan under Pennsylvania Gaming Control Board (PGGB) rules, putting the rate on par with video gaming terminals (VGT).
Shapiro is pushing for this tax rate to bring in as much revenue as possible. His administration previously estimated skill games would generate $150 million in their first regulated year, increasing to $313 million the following year. The commonwealth would put the money generated from this toward underfunded schools.
That 52% tax rate might significantly change, depending on how many businesses can afford the extra costs. A major obstacle to Shapiro's proposal is disagreement over what the fair tax rate should be. State lawmakers such as Sen. Gene Yaw and Rep. Danilo Burgos called for a drastically lower 16% rate.
The trade-off, their argument goes, is that a moderate tax rate encourages compliance while letting small businesses benefit from the games financially. Yaw and Burgos' last session introduced the bills, including the 16% rate, which stalled in both the House and Senate.
Meanwhile, Senate President Pro Tempore Kim Ward and Senate Majority Leader Joe Pittman expressed support for regulating skill games, although neither proposed a tax percentage. They do agree with Shapiro, though, on using the PGCB as the regulatory body.
Pace-O-Matic steps in
Pace-O-Matic (POM) is Pennsylvania's largest manufacturer of skill game machines and long an outspoken regulation proponent. Still, the company signaled it will oppose Shapiro's 52% tax rate as financially untenable for the industry.
POM argues such a steep tax would harm thousands of small businesses, including bars, restaurants, veterans' organizations, and social clubs. It asserts they all rely on the revenue from skill games as an extra income source.
However, the company is not wholly against a tax. POM publicly advocated Yaw and Burgos' 16% tax rate, which still raises decent revenue without forcing businesses to take the machines off. The company projects Pennsylvania would collect $250 million in the first year under a 16% tax rate.
