An increase in the sports betting revenue tax is once again on the table after the most recent measure, House Bill 639, seeks to more than double the rate sportsbooks pay on their profits.
Steep Increase
State Representative Neil Riser’s bill, HB 639, which would increase the tax rate on sportsbooks’ revenues operating in Louisiana, has recently passed another legislative hurdle after the House Appropriations Committee approved the measure by a 20-1 vote last week. The increase would be substantial, vaulting from the current 15% tax rate to 32.5% if the bill becomes law.
Previous Attempt Fell Short
Last year, a similar bill, HB 22, was proposed by Representative Roger Wilder in a special session convened in November. However, Wilder’s legislation stipulated a whopping 51% on sportsbooks’ gross gaming revenues, rivaling New York as the highest in the nation. Much to the relief of the sportsbook operators, that bill never escaped the House Ways and Means Committee.
Louisiana joins a growing number of states that have either passed increases on sportsbooks’ revenues or are contemplating such a measure. However, it should be noted that HB 639 is inextricably linked to HB 594, a bill that would create a flat tax on insurance premiums. HB 639 would only take effect if HB 594 does as well.
Sports Fund Gets Boost
Riser’s bill calls for 25% of the revenue to be earmarked for the Sport Fund (Supporting Programs, Opportunities, Resources, and Teams), which would go to Division 1 athletic departments of state colleges and universities in Louisiana. The state’s problem gambling programs would also see $2 million annually.
LSU is an SEC powerhouse and already has a budget of over $200 million annually, dwarfing all other D-1 athletic departments in the state. Nevertheless, the money would be shared equally among the following schools, including Louisiana Tech, McNeese State, Louisiana Lafayette, Grambling, Northwestern State, Southeastern Louisiana, Southern University, UL Monroe, University of New Orleans, Nicholls State, and of course, LSU.
Estimates project that the tax increase would raise an additional $31 million for the aforementioned athletic departments, which equals roughly $2.8 million per school.
“The need is so high,” Riser said. “When you start talking about the SEC, talking about any level of athletics right now, it’s changed so dramatically.”
Sportsbooks Mount Opposition
Tax increases on sports betting revenue may be welcomed by the states, but the gaming industry routinely opposes any such measures. The industry argues that should the tax rate becomes too severe, advertising budgets will be slashed, bonuses will be less frequent, and odds will not be as attractive.
As a result, it could lead to fewer customers and a decreased handle. Should that happen, it would ultimately affect the bottom line of the sportsbooks but also decrease the taxes collected by the state.
Industry Voices Warn of Black Market Risks
Bill Pascrell III, a lobbyist with Princeton Public Affairs Group, said, “Every casual observer that’s not part of this industry thinks this industry is massively profitable. So, you have to educate that the margins are thin in sports betting. They’re a little bit better in iGaming.”
“When taxes are increased on the licensed regulatory regime, we’re putting a burden on the people who are acting responsibly, legally in regulatory compliance, and we are doing nothing to penetrate the black market,” Pascrell added.
“Low taxes like we have in multiple states, including New Jersey, have proven to do incredibly well.”
