PA Legislator Wants Tax Reduction for Sports Betting Operators. Will NJ Follow Suit?

Pennsylvania and Nevada lawmakers team up to get rid of what they call “unnecessary” taxes levied against legal sports betting operators.

According to the American Gaming Association, the Internal Revenue Code requires regulated sports betting operators to pay a 0.25% federal excise tax on all bets, as well as a $50 tax annually for each employee who receives those bets.

In a bipartisan effort to repeal the tax, U.S. Representative Guy Reschenthaler, a Republican from Peters Pennsylvania, and Representative Dina Titus, a Democrat from Las Vegas, Nevada, introduced legislation to repeal the burdensome tax.

Bipartisan Effort to Relive Burdensome Taxes on Sports Betting Operators

“At a time when so many workers in the industry are struggling to make ends meet, this bill stops penalizing employers who create jobs by eliminating the per-employee tax,” Reschenthaler said. “Gambling is an important economic driver in Pennsylvania, the state’s gaming industry supports more than 33,000 jobs. This legislation helps pave the way for job creation and economic growth.”

“Sports are back,” noted Titus. “Unfortunately, penalizing legal sports betting operators remain. The handle tax makes it difficult for legal sports betting operators to compete against illegal operators. Repealing this tax will bring more gamblers out of the black market and into the regulated market. The last thing we need is to force sportsbooks to pay a per-employee tax when casinos are still announcing new rounds of furloughs and layoffs.”

“I’m proud to team up with Gaming Caucus Co-Chair Representative Dina Titus to introduce this important legislation. It will get rid of an outdated tax as well as burdensome requirements on the gaming industry,” added Congressman Reschenthaler. 

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Sportsbook Employee Tax Hardly Worth It to the Feds

The American Gaming Association said the sportsbook employee tax brought in less than $33 million in federal taxes last year. The AGA also pointed out that sportsbooks work with a “very low margin.” For example, in Nevada, sportsbook revenue is typically only 5% of the total wagered before operating expenses and taxes.

Bill Miller, American Gaming Association President, and CEO, “The federal taxes levied on legal US sports betting operators generates very little meaningful revenue for the federal government. Rather, the taxes put legitimate businesses at a disadvantage competing against illegal gambling operations.”

Of that $33 million, sports betting operators in Nevada paid around $13.3 million in handle taxes, more than any other state. Congresswoman Titus tried to find out how the federal government allocated the revenue it received from the handle tax, but “The IRS couldn’t give me an answer to how the money was being used.”

However, just this year, between Nevada, New Jersey, Pennsylvania, and Indiana, sports betting generates around $1 billion in taxable gross gaming revenue, according to Forbes.

Some forms of sports betting, such as sports waging operated by state lotteries and horse racing, are already exempt from the handle tax.

The Handle Tax is Out of Step with the Times

According to Bill Miller, the federal sports betting taxes were enacted in 1951 to stop illegal gambling. However today, the taxes do the opposite by putting legal sports betting operators at a disadvantage. The taxes make it harder for legal sports betting operators to compete against illegal gambling operators that don’t pay taxes or licensing fees.

“To absorb the burden of these federal taxes, legal sports betting operators are forced to offer worse odds and poorer payouts compared to illegal bookies. It also forces them to curtail their investment in promoting legal sports betting to the public,” Miller said. “Furthermore, the per-employee tax serves to discourage hiring at a time when jobs are critical.”

Dina Titus added that repealing this tax would “push more consumers out of the black market and into a well-regulated market.”

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