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Penn National Gaming Inc. Message Board

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  • dundarra dundarra Apr 14, 2004 9:21 AM Flag

    PENN Doesn't Need Maine Racinos

    I am still baffled as to how the current legislation results in an "effective 49% tax rate" for Penn. Can someone please explain this?

    http://www.bangornews.com/editorialnews/article.cfm/ID/420516

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    • I already have...read my posts from the last 2 days.

      1% tax on gross wagers is the same as a 10% tax on net revenues...

    • I still do not get it as well.

      If I go to Bangor and bet $1000 for the day on the slots, the state will get 1% of the handle or $10 and, on average, I will get back 89% or $890, leaving $100 for PENN and other takeouts. PENN gets 61% or $61.

      Under the original set up, I would get 90% back on average, or $900; PENN gets 61% or $61 and the state gets 39% or $39.

      • 1 Reply to finster63
      • "If I go to Bangor and bet $1000 for the day on the slots, the state will get 1% of the handle or $10 and, on average, I will get back 89% or $890, leaving $100 for PENN and other takeouts. PENN gets 61% or $61.

        Under the original set up, I would get 90% back on average, or $900; PENN gets 61% or $61 and the state gets 39% or $39. "

        I will explain this ONE last time...

        When you go to bangor with 1K do you think you will play the money once (ie, put 1K in and if its a $5 machine push the button exactly 200 times) and then leave? Nobody does that. The push the button 200 times, take their winnings or losses from their play, and continue playing. That Theoretical $890 or $900, depending on the hold, then goes back into the machine and becomes less and less and less until they lost all their money. This is how slot machines work. For every 100 people who lose their $100 1 person wins $9000.

        By taking 1% of the gross wagers they are effectively taking 10% of the net winnings. That person that comes in with the $1000 will spend the same $1000 whether its an 89% hold or a 90% hold, and they will lose it regardless of that hold - the only question is HOW LONG it takes to lose it...

        Bottom line: The total amount wagered number CHANGES depending on the hold. That is where you are erring in your analysis. If the hold is 99.9% then the total amount wagered would be HUGE as people would keep recycling money over and over and over until they lost it. If the hold is 50% then the total amount wagered would be much much less as people would lose their money very quickly.

        This is where your logic is flawed.

 
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