New Jersey state Senator John McKeon has unapologetically placed himself as a proponent of higher taxes on internet sportsbooks and casinos. The first-term senator submitted a bill that would significantly increase taxes on internet gambling from current levels to 30% in an effort to boost state income.
Senator McKeon’s proposed legislation, Senate Bill 3064, also includes raising the tax rate for internet casino operators from its current level to 30%.
Currently, the Garden State imposes various tax rates on different forms of gambling revenue. For instance, there is an 8.5% tax on the adjusted gross revenue generated from retail sports betting activities and a 13% levy on the adjusted gross revenue derived from sports betting apps.
In addition to these rates, the state applies a 15% tax on online casino revenue. However, an additional 2.5% of this revenue is allocated to the Casino Reinvestment Development Authority (CRDA). Similarly, online sports betting revenue is subject to a 13% tax, with an extra 1.25% earmarked for specific purposes.
When considering these additional percentages, the total tax rates for online casinos and sportsbooks currently stand at 17.50% and 14.25%, respectively.
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McKeeon Argues Tax Increases Profitability in Neighboring States
Senator McKeon noted the comparative advantage of New Jersey’s tax rate in relation to neighboring states. For instance, while New York imposes a substantial rate of 51 percent and Pennsylvania levies a rate of 36 percent on operators, New Jersey’s rate stands lower.
It’s worth noting that New York allows for promotional deductions, effectively reducing the tax rate to 24 percent and since its launch in Jan. 2022, New York has amassed a significant tax revenue of $1.73 billion from online sports betting, based on a handle of $39.2 billion. The same volume cannot be said in regard to the Garden State, which has collected $286.7 million from a handle of $26.1 billion during the same period.
In July of last year, Governor Mike DeWine of Ohio implemented a significant increase in the tax rate, raising it to 20%. This decision was met with mixed reactions, with some considering it punitive, especially due to the overwhelming presence of sportsbook advertisements on television and radio across the Buckeye State.
Despite the controversy, Ohio saw a significant increase in tax revenue, collecting $79.2 million in state taxes during the first six months after the rate doubled. This no doubt recorded a significant jump compared to the $57.6 million collected during the same period the previous year, when the tax rate stood at 10%.
Similarly, Governor JB Pritzker of Illinois outlined plans to raise the tax rate substantially in his recent “State of the State” address. Proposing an increase to 35%, more than double the current rate, Pritzker aims to improve the state’s budget for Fiscal Year 2025, which totals $52.7 billion.
Atlantic City Pushes to Override Tax Increase
The President of the Casino Association of New Jersey, Mark Giannantonio, has expressed strong opposition to the proposed law, reaffirming the group’s unwavering opposition to any planned tax increases that would specifically target online gambling.
This is likely because Atlantic City casinos draw a percentage of their earnings from internet casino activity in New Jersey. Although this online revenue is swamped by revenues from in-person gambling at their physical locations, it is a major portion of their overall revenue.
Thus, the rise in tax rates on internet casino revenue might negatively impact these operators’ financial returns. As a result, Senate Bill 3064, which calls for this kind of tax increase, is likely to face strong resistance.
NJ Revenue Reports Reflect Excellent Performance
According to the most recent information provided by the official New Jersey Division of Gaming Enforcement, the Garden State reached a new state high in January, handling an incredible $1.72 billion in sports bets.
With this figure, the state’s betting activity surpassed the $1 billion milestone for the sixth consecutive month. Thus, this 136% increase over the same time last year highlights the incredible growth of sports betting in New Jersey.