Crying in Their Beer

Tavern owners’ uphill battle to get video game terminals

(Photo Left) PA barkeeps are hoping for a winning hand. Photo by Kvuo via Wikimedia Commons.

The last time we can recall the tavern owners of Philadelphia rallying around a legislative initiative was in the 1990s and that was to defeat the liquor-by-the-drink tax — a dedicated funding stream for the city’s schools - and that failed.  Today the tavern owners are rallying to pass something — a piece of legislation designed to allow them to set up video gaming terminals (VGTs) in their establishments.

As in the fight over the liquor tax, the tavern owners are crying over their spilt beer.  Back then, it was their sky-is-falling argument that a drink tax would force the shuttering of hundreds of taverns across the city as patrons refused to pay the surcharge.  Today, the clouds on the horizon for the tavern owners are not tax based; these clouds come in the form of empirical evidence that the Commonwealth has created a new economic environment that threatens them.  The 21st century threat has not come in the form of a new tax.  Rather it has come in the Pennsylvania Liquor Control Board’s expansion of six-pack sales to grocery stores and supermarkets.  And the proof is in the pilsner, so to speak. 

As reported by Justine McDaniel for philly.com, “In 2016, takeout sales accounted for $81,000 in revenue [at McStew’s Pub in Levittown]. In July 2017, it was $64,000.  The state’s new law allowing six-packs to be sold in grocery stores and breweries has seriously diluted bar owners’ once-lucrative takeout business — a trade that usually accounted for nearly half of the revenues at McStew’s, said owner Tom Tyler.” 

Beyond allowing VGTs to compensate the tavern owners for the lost beer revenue, which at best is a dubious public policy goal, the tavern owners identify two far more powerful public policy arguments as laid out in Ms. McDaniel’s piece:

“Proponents in Pennsylvania contend that VGTs could bring in $500 million in state taxes and $53 million in county and local taxes, according to estimates by Commonwealth Gaming.”

Then there is the existing illegal video gaming currently taking place in taverns. Per Ms. McDaniel: “Those who want VGTs have said there are ‘tens of thousands’ of illegal machines already in bars across the state … ‘[L]egalizing VGTs will help to eliminate the “underground” video poker economy,’ State Rep. Paul Costa (D., Allegheny) said at a news conference last year … [All of this leads] Jerry Walsh., whose chain, Big Heads, was down half a million dollars because of the to-go sales switch, to wonder why politicians ‘don’t get it.”’

Why indeed, Mr. Walsh?  The answer is that a very powerful lobby doesn’t want them to get it, or for you to have the machines Mr. Walsh.  A lobby, whose members include Penn Gaming in Harrisburg, the Sands in Bethlehem, and Parx Casino in Bucks County, that shelled out $65 million apiece to control a monopoly on gaming in the Commonwealth.  

So, don’t be surprised Mr. Walsh that State Senator Chuck McIlhinney, the one who chairs the senate committee, has no intention of allowing your taverns VGT licenses any time in the near future. 

The committee would have to find in favor of the VGT legislation to get a vote to the Senate floor and Sen. McIlhinney happens to represent Bucks County: the very county that hosts Parx Casino, the highest grossing casino in the state.

As Sen. McIlhinney stated, “We will be holding hearings on the issue of legal gaming machines and, as part of that process, will focus significant energy on addressing and ending this scourge of illegal VGT’s across the Commonwealth.”

This is like Republicans saying they will discuss a pathway to citizenship for Dreamers only after we build a wall that the Mexicans have paid for.  We would rather see the pro-casino crowd rely on the Illinois experience to reject VGT’s for the increase in crime that comes with them.

A recently released University of Illinois study detailing this cause-effect relationship concluded “that (i) access to gambling increases violent and property crimes; (ii) these are new crimes rather than displaced incidents; and (iii) the effects seem to be persistent in time.”

Bottom line: The casinos have the capital and the crime stats on their side.  If they don’t win in the legislature, they will tie the tavern owners up in court crying violation of the Gaming Control Act.  The tavern owners have a hardship story; crying in their beers didn’t help the tavern owners in the 1990’s, we doubt it will help them now.



Crying in Their Beer

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