Department of Revenue outlines revenue estimates for cannabis, skill-game taxes and corporate reporting changes
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Summary
Secretary Brown told the House Appropriations Committee that the governor’s proposals — adult-use cannabis, taxing skill-based gaming machines and combined corporate reporting (CNIT) changes — together account for substantial potential revenue and will be important to sustaining out-year budgets.
Secretary Brown, secretary of the Pennsylvania Department of Revenue, told the House Appropriations Committee on March 11 that the administration’s revenue proposals in the governor’s budget could substantially affect the commonwealth’s fiscal outlook.
Brown said the department’s current estimates for the budget planning cycle show adult-use cannabis, including fees and taxes, at about $730 million for the partial budget year and roughly $287 million in a full year of tax collections. For the governor’s skill-games proposal, Brown said the department projects roughly $766 million in the budget cycle, comprised primarily of taxes and smaller fee amounts. On combined reporting for corporate net income taxes, Brown said the department estimates about $328 million in the budget cycle, with larger impacts in later years as the change phases in.
“These are the primary tax proposals,” Brown said, adding that the department is using benchmarks from other states and existing industry data to shape its modeling. He cautioned that the administration’s projections are contingent on implementation timing and broader economic trends.
The estimates prompted lawmakers to press on implementation and economic effects. Representative Young asked how much revenue those proposals would have generated had they been enacted when the governor first introduced them; Brown replied that including offsets and other proposals the unclaimed potential could reach roughly $1.8 billion across planning years.
Representative Krupa raised practical questions about launching adult-use cannabis by Jan. 1, 2027. Brown said the state would rely on existing medical-dispensary infrastructure for an initial rollout and would work with the Department of Agriculture and the General Assembly on statutory language and subsequent regulations: “We do have an infrastructure out there that exists, and we expect that that will allow us to implement this relatively quickly.”
On skill games, Representative Barton asked whether the governor’s 40,000-machine figure referred to the 2026–27 budget year or a later full year; Brown said the department assumes 20,000 licensed machines in the 2026–27 period and 40,000 for a full-year cycle, with about 9,000 establishments in a full year. Brown acknowledged there is not a current formal economic-impact study on the effect of applying the 52% excise rate to skill machines and said the department could do further research if requested.
On corporate tax changes, Brown described combined reporting and add-back provisions as mechanisms to prevent intercompany profit shifting and align taxation with how businesses actually operate, while noting constitutional limits on applying different personal income tax rates to different income classes.
Committee members pressed on the assumptions behind the forecasts and the department’s ability to administer new tax regimes. Brown said sales and personal income projections — the largest drivers of revenue capacity — remain favorable in the department’s baseline, but cautioned that non-withheld personal income tax growth tied to capital markets could be vulnerable to corrections.
The committee did not take any formal votes during the session; members indicated they will seek statutory language and additional data as budget negotiations continue.
