Governor Phil Murphy’s Controversial Tax Proposal on Online Gambling and Sports Betting

Governor Phil Murphy has unveiled a comprehensive new state budget that addresses various sectors, with a particular emphasis on online gambling and online sports betting.

However, his proposal has stirred significant controversy within the sector, as the governor aims to impose a 25% uniform tax on both sports gambling and casinos, increasing from the current rates of 13% and 15%, respectively.

New Tax Hike Sparks Strong Opposition from Gambling Industry Leaders

The governor’s office argues that this move could generate an estimated $400 million in additional tax revenue for the Garden State. While this projection appears favorable on paper, there are broader implications that could potentially undermine the sector’s competitiveness. This proposal is not entirely unprecedented, as Louisiana recently considered a similar approach.

The announcement was met with serious skepticism from the Sports Betting Alliance (SBA), representing major companies successfully operating within the state, including:

• BetMGM
• Fanatics Sportsbook
• FanDuel
• DraftKings

Unsurprisingly, the SBA expressed significant concerns about the practicality of the proposal, emphasizing the potential negative repercussions it could entail. The organization highlighted the substantial economic contributions casinos and gambling companies have already made to the Garden State, including the creation of thousands of jobs and the generation of hundreds of millions in revenue for the government.

Increasing the tax uniformly could adversely affect the sector’s competitiveness and place companies at a disadvantage compared to unregulated and offshore markets, the SBA warned. However, many offshore operators have been directly confronted in New Jersey, with several withdrawing from the market under the threat of action by the US Department of Justice.

Among those voicing their opposition to the proposed tax increase is Resorts Casino Hotel President and Casino Association of New Jersey President, Mark Giannantonio. He contended that the tax hike would ‘threaten the stability of Atlantic City’s gaming and tourism industry, as well as the industry’s workforce,’ as reported by the Atlantic City Press.

Nonetheless, increasing taxation on the gambling sector has become a growing trend. States such as:

• Mississippi
• Maryland
• Ohio
• Pennsylvania
• Michigan

have all proposed measures to raise gambling taxes to boost state revenue. Massachusetts is also considering the potential introduction of iGaming, alongside exploring a tax rate increase.

Tax Increases Occurring Across the United States

The response from the industry has been consistent across the board – raising gambling taxes could harm the long-term competitiveness of the market, leading to job reductions, wage depressions, and a shift in favor of offshore and black markets.

For instance, Mississippi has proposed increasing the land-based casino tax from 8% to 12%, and Ohio Governor, Mike DeWine, is pushing to double the tax rate for the second time within a few years, potentially increasing it from the current 20% to 40%.

The actual impact of these tax increases on the gambling industry and whether the anticipated negative outcomes will materialize remains to be seen. However, it is clear that tax increases in the gambling sector are on the horizon.