Lawmakers Call For An End To Federal Sports Betting Excise Tax
With legal sports betting spreading across the country, a federal excise tax placed on legal sports wagers in the 1950s could be going by the wayside. The quarter-percent “handle tax” on legal sports wagers (and 2% on illegal wagers) was initially enacted “to facilitate the enforcement of state criminal laws against gambling.”
Reps. Dina Titus (D-NV) and Guy Reschenthaler (R-PN) were the two responsible for coming together in a bipartisan effort to introduce legislation to abolish the excise tax. If passed, the legislation would also effectively end an additional $50 annual tax that businesses must pay for every sportsbook employee.
Things Are Different This Time Around
This is the second straight year in which representatives of both parties have joined forces to abolish the Federal sports betting excise tax, and far from the first discussions on the topic. Titus and Reschenthaler introduced a similar bill in 2020 that never received a hearing, but more states have since legalized sports betting, and momentum is greater now than ever before to end the federal excise tax on sports betting.
In total, 22 states have gone live with legal sports betting operations. Four more are expected to go live this year, and 16 more are in some phase of introducing legislation to add their names to the list.
Titus’s home state of Nevada led the nation in paid handle taxes ($13.3 million) in 2019, and as such, it’s not surprising to see a representative of the Silver State leading the charge to get rid of such a tax. In fact, Titus’ attempts to eliminate the handle tax go back to 2014 when Nevada was the only state to offer legal sports betting.
Said Rep. Titus of the matter, “As more states recognize the benefits of legalizing and regulating sports betting, repealing the handle tax will create jobs in Southern Nevada and across the country.”
Handle Tax Hurts Who it Intends To Help (and Vice Versa)
In today’s global world, illegal operators can set up shop in offshore locations and avoid both the excise tax and the consequences for skirting said tax.
Of course, legal operators cannot escape this tax, which puts them at a disadvantage to their unregulated, overseas counterparts. It also comes directly out of these sportsbooks’ bottom lines, and it’s already hard enough to stay in business when you’re in the gambling business, considering the tax and licensing burdens they have in each state.
The cost of the seemingly minuscule .25% federal excise tax works out to roughly a 5% tax on revenue.
C. Auxier of the Tax Policy Center added that governments can tax businesses on handle and winnings independently of one another, meaning sportsbooks could be on the hook for handle taxes even during losing months. Such costs can even go as far as to price operators out of the market, potentially putting thousands of people out of jobs and further enabling unregulated offshore books to thrive.
Rep. Reschenthaler also weighed in on the importance of casino operators within his state. “The bill will ensure the gaming industry, hit hard by COVID-19 mandated closures and the cancellation of sporting events, is able to support good-paying jobs and economic growth in southwestern Pennsylvania and across the country,” he said.
AGA CEO Miller Applauds Efforts
Upon introducing the bill, American Gaming Association (AGA) President and CEO Bill Miller echoed his support of the efforts. Miller, too, highlighted that the tax puts legal, complicit operators at a disadvantage and said that getting rid of the tax would work towards leveling the playing field in that regard.
Miller also highlighted the need for this level playing field in a growing industry. “I’m grateful to Congressional Gaming Caucus Co-Chairs Reps. Titus and Reschenthaler for introducing this much-needed legislation that will continue fostering growth for the legal market and better protect customers,” Miller said.
Despite COVID-19 hurting the casino industry as a whole, sports betting did grow throughout the pandemic. The number of states with legal, regulated sports betting has nearly doubled since 2019, and as a result, the AGA reported that $1.53 billion was accounted for in related revenue.
Of course, that number can and will continue to grow as sports betting becomes legal in more states and more commonplace in all legal markets.
Hill Kerby comes from a background of poker, sports, and psychology, bringing all of them to the table with his writing. An overall fan and proponent of competition, Hill looks forward to the continued growth of all forms of betting as more markets open across the country.
