New Jersey Gaming Tax Drops Only 5.5% in 2020, Thanks to Online Gambling

 Gaming tax generated comparable levels of revenue despite the statewide shutdowns. However, tax revenue in New Jersey from the hospitality, leisure, and tourism industries has been severely impacted this year due to the Covid restrictions imposed by the state. However,

The fact that Atlantic City’s casinos were ordered to shut down by Governor Phil Murphy for nearly four months, didn’t impact the state’s ability to collect gaming taxes.

While the first 10 months of 2020 saw casino gaming tax revenue decline by $12.7 million, or 5.5%, year-over-year, gambling taxes from online casinos minimized that decline.

Internet Gambling Saves Programs for Seniors and the Disabled

Gaming taxes, whether from land-based or online casinos, go into the Casino Revenue Fund for programs assisting the disabled and seniors throughout the state. That assistance includes vocational and educational services, transportation, housing assistance, and medical reimbursements.

The reason for the relatively small decline in casino gaming taxes during the Atlantic City casino closures is the internet.

“Internet gaming tax revenue more than doubled this year. Gaming taxes on industry were important in helping to offset losses in from brick-and-mortar casinos,” observed Jane Bokunewicz, coordinator of the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism at Stockton University.

When Governor Phil Murphy ordered Atlantic City’s nine casinos to close in mid-March, online sports betting and iGaming picked up. Also, online and mobile forms of internet gambling are taxed at a higher rate than in-person gambling.

The Atlantic City casino shutdown lasted 107 days, but the casinos eventually reopened July 2, with greatly reduced capacity limits, and other restrictions, such as on live entertainment and dining.

“For an industry looking at nearly a 23% year-to-date loss of total gaming revenue due to Covid-related restrictions, you would expect an equal degree of decline in gaming tax. Fortunately for New Jersey, revenue from online gambling is taxed at 15%, close to double the rate of land-based gaming at 8%,” said Bokunewicz.

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Online Gaming Taxes Buffer the Blow for New Jersey

Gaming taxes from online gambling gross revenue jumped by more than $59 million through the end of October, compared to the same period last year. The $117 million in gaming taxes generated from online gambling revenue accounted for almost 54% of the year-to-date total of more than $217 million collected from overall gambling taxes.

Mobile and online sports betting taxes also increased by more than $3.6 million.

Casino gaming taxes in 2020 have surpassed 2019 levels every month that was not affected by the state-ordered casino shutdowns. For example, gaming taxes in January and February increased by 24% and 19%, respectively. Post-shutdown, August, September, and October have also exceeded the prior year gaming taxes.

Will the Uptick in Gaming Tax Continue?

While it’s still too early to predict whether the Covid-related shift to online gaming will last, or if gamblers will return to the Atlantic City casinos once the restrictions are completely lifted, and people feel more comfortable going to a casino. But a shift back to Atlantic City tourism brings benefits to both the state, casino operators, and the community at large.

“With the return to tourism, casinos would pay a lower gross gaming tax rate of 8%, and also benefit from spending by guests on non-gaming activities at their resorts. The state would not only benefit from gaming taxes, but also on food and beverage, sales, and room taxes. Also, it would bring back the many jobs that were lost due to the shutdown,” she said.

The increased online gaming taxes for casino operators this year are exacerbated by the lost revenue due to the shutdown and the expense to reopen, due to the compliance issues related to health and safety protocols.

Casino Control Commission Chairman James Plousis praised the industry for being nimble in the face of unprecedented challenges.

“The fact that the casinos were able to responsibly manage their properties while finding ways to remain successful, with the goal of rehiring their staff is a testament to Atlantic City’s resilience and resourcefulness. That’s why I remain confident in the city’s future,” Plousis said.

The Casino Revenue Fund

In 1976, the Casino Revenue Fund was established with the goal that state gaming taxes would be used solely for the purpose of “providing funds to reduce property taxes, rent, telephone, electric, gas, and municipal utilities charges of eligible senior citizens and disabled residents of the state.”

In 1981, the fund’s authorized use was expanded to include additional health services and transportation services to eligible seniors and disabled residents.

In 2019, the Casino Revenue Fund received $233 million from gaming taxes. The Fund’s Advisory Commission had projected gaming taxes of more than $261 million in 2020.

However, the gaming tax from sports betting revenue is divided between the Casino Revenue Fund and the state General Fund.

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