New Jersey Weighs Higher Gambling Taxes Amid Growing Support

The proposal shared on Tuesday (25 February) by Murphy is the latest in a series of gambling and sports betting tax increases proposed in the US over the past year. There is an element of irony given that Murphy’s name was on the lawsuit that led to the overturning of the Professional and Amateur Sports Protection Act in 2018. Since that pivotal event, 38 states have introduced forms of sports betting, with Missouri also planning to launch later this year, and two states have already increased their original sports betting tax rates.

Murphy proposes raising both the sports betting and igaming tax rates to 25%, up from the current 13% and 15%, respectively.

“This tax increase would be a wrong turn for New Jersey,” argued industry lobbyist Jeremy Kudon in a statement on behalf of the Sports Betting Alliance (SBA). “Since New Jersey first launched regulated sports betting seven years ago, operators have created thousands of jobs and generated millions in revenue for New Jersey. Raising sports betting taxes will increase costs for customers, deter operator investments in jobs and local partnerships, and leave the regulated industry at a disadvantage against unregulated and offshore operators who pay no state taxes.” BetMGM, DraftKings, Fanatics Sportsbook, and FanDuel are all members of the SBA.

### ‘Slap across the face’

The iDevelopment Economic Association (iDEA) shared sentiments similar to Kudon’s, with co-founder Jeff Ifrah urging New Jersey and other states to direct their focus towards unregulated and illegal markets. “It is baffling why the Governor would seek to undermine success by imposing even more taxes on an industry already exceeding its economic promise,” Ifrah said in a statement. “Meanwhile, competition is growing from unregulated alternatives, including CFTC-approved sports contracts that accept bets from 18-year-olds, operate outside state laws, and pay no state taxes.”

From an economic perspective, gambling taxes have become contentious issues. Lawmakers often propose increases as “faceless” solutions, suggesting they will yield more tax revenue without significantly affecting consumers. BetMGM, headquartered in New Jersey, has made substantial financial investments in the state, as well as in Maryland and Massachusetts, where lawmakers have also proposed sharp gambling tax hikes recently. “The irony is in a state (New Jersey) that has prioritized the economic development of the igaming industry, the governor metaphorically slapped the industry across the face with the proposed tax increase,” remarked B Global principal Brendan Bussmann. “It is counterintuitive to claim ‘I want to focus on economic development’ and then impose more than a 60 percent tax hike.”

### Taxes already hiked in Illinois, Ohio

In the past six months, proposals to increase gambling taxes have emerged in at least six other states. The most recent is Mississippi, where a legislative committee advanced a bill to increase the state’s land-based casino tax from 8% to 12%, although the state has no digital gambling. In the past 18 months, governors in Ohio and Illinois initiated significant sports wagering tax increases. In 2023, Ohio’s Mike DeWine led the doubling of that state’s rate from 10% to 20%. DeWine’s new budget proposes yet another doubling, from 20% to 40%.

In Illinois last year, the legislature adjusted and increased governor JB Pritzker’s proposed sports betting tax hike. A tiered system was implemented, with the lowest-grossing sportsbooks paying a 20% tax and the highest paying 40%, up from 15%.

“The problem is the industry can’t afford to be passive anymore,” Bussmann said. “It must actively oppose these tax increases rather than accepting them and dealing with consequences down the line. The current predicament stems from a longstanding failure to properly educate stakeholders on the business model.”

### Lawmakers push back

In other states, proposals exist to raise rates to as much as 51%. New York is currently the only open, competitive market with a tax that high. Even though Murphy’s proposal would keep the rate below 51%, New Jersey lawmakers have already opposed it. “Simply put, doubling the tax on online sports betting and igaming threatens a New Jersey success story,” a group of south New Jersey senators noted. In Ohio, DeWine has faced similar opposition, which may inhibit legislative support for the increases.

However, Deutsche Bank analysts speculated, “we strongly expect the New Jersey icasino tax increase passes, though possibly with some adjustments along the way, likely resulting in a slightly lower rate.” They also suggested the online sports betting tax increase is “likely” to pass.

### Other proposals

Here’s a look at other states considering gambling tax increases:

**Louisiana**: Last November, a bill that failed to gain approval would have raised the digital sports betting tax from 15% to 51%.

**Maryland**: Lawmakers are considering further gambling expansions. Governor Wes Moore proposed doubling the sports betting tax from 15% to