Pennsylvania leaders need to find a better way to fix the commonwealth’s persistent structural deficit than ruinous taxes on so-called “skill games” — the arcade-like devices that feature in so many bars and other places like convenience stores and laundromats.

While these devices do need to be regulated and taxed, treating them as a source of revenue on par with casino slot machines would ultimately privilege gambling behemoths over small establishments and community institutions.

”Skill games” are video devices that have been determined by Pennsylvania state courts to require a bare minimum of “skill” — typically well-timed button-pushing — so that they do not qualify as “gambling.” The difference is hard to find, and in practice these skill games function as video slot machines.

Due to this idiosyncrasy in Pennsylvania law, skill games have proliferated across the commonwealth in two types of locations: businesses such as convenience stores and laundromats, and gathering places like pizza parlors, bars and social clubs like the American Legion and VFW, which are often important community institutions. In many cases, the revenue generated by the devices has become essential to these small establishments’ survival, faced with continually rising prices and the lingering effects of COVID restrictions.

The devices themselves are potentially addictive, and in the long run, just as with playing slots, the players lose money. Ideally, neither skill games nor slot machines would have been allowed in Pennsylvania to begin with, so Harrisburg would never have become addicted to the revenues they generate — largely on the backs of those who can least afford it.

But casinos are completely entrenched in the commonwealth, and so are skill games. The question that faces policymakers now is what to do about it.

Gov. Josh Shapiro proposes taxing skill games revenues at 52%, just two points less than casino slot machine revenues. He argues that this will generate about $370 million in taxes for the state.

State Sen. Gene Yaw, R-Lycoming, whose district includes the prime manufacturer of Pennsylvania skill games, proposes a 16% tax rate. We think Mr. Yaw closer to the mark. A confiscatory tax on skill games will help casinos — which is why they’ve waged a campaign to support it — and hurt local small businesses and community institutions.

Casinos want skill games to be treated on par with their own offerings because that would make the tax burden intolerable for many small establishments that have come to rely on the devices for secondary revenue. The gaming industry is perfectly happy to see neighborhood bars and diners and American Legions not just ditch their skill games, but fold entirely — all the more consumers for them to lure in.

But we aren’t, and neither should state policymakers.

There are areas in this controversy where everybody seems to agree. First, skill games must be regulated, including state oversight of transactions. Second, standalone skill games parlors should not be permitted. The devices must only be a secondary source of revenue for a business.

We’d also like to see a regulatory structure that minimizes skill games in retail settings, such as convenience stores. A business should be an established gathering place — that is, it should serve food and drink at tables — before being allowed to deploy the devices.

Pennsylvania would be a healthier commonwealth with neither casino gambling nor skill games. But neither are going anywhere. Therefore, the best option is to give local establishments — the kind of places that anchor communities, and where problem behavior can be checked by the community — a fair chance to deploy skill games. That means keeping taxes well below casino rates.

— Pittsburgh Post-Gazette via TNS