New Jersey’s Senator John McGinley has formally presented a legislative proposal that would increase the tax rate on internet and athletic wagering to 30%.
At present, online and sports betting are subject to a tax of 15% and 13% of total gaming revenue, respectively.
Senate Bill 3064 was officially submitted on April 8th, subsequent to its introduction last week. The bill was assigned to the Senate State Government, Wagering, Tourism and Historic Preservation Committee.
If approved, the proposal would modify Section 17 of P.L.2013, c.27 (C.5:12-95.19), which establishes the online gambling tax rate. Section 7 of P.L.2018, c.33 (C.5:12A-16), which addresses sports betting taxes, would also be amended.
As per the bill’s text, if legislators endorse the proposition, it would take effect on the following January 1st after the date of enactment.
The 30% tax rate would impose a significant financial strain on New Jersey’s 18 mobile sports betting firms, elevating taxes to the highest level in the nation. New York’s 51% sports betting tax rate currently holds the top spot in the competitive market, followed by Pennsylvania’s 36% gross gaming revenue tax.
Certain areas, such as Delaware, New Hampshire, and Rhode Island, levy a 51% to 50% gross gaming revenue (GGR) tax on operators, but all operate monopolies through state lotteries.
For online gambling establishments, New Jersey presently has one of the most affordable tax rates, with 30 online gaming sites in operation. A 30% GGR tax would place the state ahead of Connecticut (18% GGR, rising to 20% after five years), Michigan (20%), and West Virginia (15%).
Pennsylvania still holds the highest tax rate on slot machines at 54%, although the table game tax rate is 16%.
Did Ohio establish a precedent for increasing taxes?
If New Jersey proceeds with Senator McKeon’s proposal, it will follow Ohio’s lead and double its tax rate.
Last July, Ohio Governor Mike DeWine increased the tax rate from 10% to 20% in the 2024-25 budget.
Since the introduction of sports wagering, DeWine’s relationship with the industry has deteriorated rapidly, primarily due to advertising. The state’s Casino Control Commission has since acted swiftly to curtail the overabundance of sports betting marketing.
New Jersey in the limelight
New Jersey’s gambling industry has been a subject of intense discussion thus far in 2024. In January, Senator Joseph Pennacchio reintroduced a bill to launch racetrack slot machines and restrict advertising. The bill has been presented numerous times since 2014, failing to advance beyond the committee stage in 2020 and 2022.
Toward the end of the month, an investigation conducted by the National Economic Research Associates, funded by the Fair Play for America movement, proposed that New Jersey’s digital gambling market had a detrimental effect on the state’s financial standing. The investigation asserted that its positive tax contributions were counteracted by escalating gambling-related harm expenses.
However, this investigation conflicts with a 2019 study by Dr. Alan Meister of iDEA Growth’s Meister Consulting and Gene Johnson of Victor Strategies. Online casinos alone produced $401 million in worker salaries and 6,552 full-time positions between 2013 and 2018.
The investigation observed that legal online gambling generated $259.3 million in tax income for state and local authorities over the five-year period, including $178.9 million in gambling taxes.
New Jersey’s gambling income achieved a new peak in 2023, reaching $5.78 billion, a record high. Income remained elevated in January alone, reaching $559.1 million, a 28.0% increase compared to the previous year.
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