A lawmaker in Louisiana has introduced a bill that would raise the online sports betting tax rate for operators from 15% to 51%.
Louisiana State Representative Roger Wilder (pictured) has proposed a new bill, HB22, that would raise the state’s tax on online sports betting GGR to 51%, more than three times the current rate.
Under current law, Louisiana levies a 15% GGR tax on online sports betting, a rate that has remained consistent since the state legalised online betting. The proposed increase would bring Louisiana to the top of the national scale, aligning it with New York’s taxation level, the highest in the US.
Should the bill pass, it would mark a significant shift in the state’s approach to sports betting, sparking both economic and operational repercussions for stakeholders in the gaming industry. However, HB22 does more than just increase the tax rate.
The bill also aims to end the longstanding practice of allowing operators to deduct promotional credits from their taxable income. Over the past fiscal year, operators provided Louisiana players with $44.4m in promotional credits.
These credits, deducted from taxable revenue, have played a substantial role in reducing the tax burden for gaming companies in Louisiana. In turn, they have attracted players to the legal sports betting market.
A long road ahead
The bill, introduced on 10 November, has been referred to the Louisiana House of Representatives’ Ways and Means Committee, where Representative Wilder is a member.
For HB22 to become law, it would need to secure a two-thirds majority in both the House and the Senate — a tall order, given the sharp opposition it faces from industry advocates and certain lawmakers.
The law is not likely to cause any of the eight operators in the state to exit, however. Louisiana is bordered by three states, none of which currently offers legal sports betting, which gives operators in the state a local advantage.
The debate over HB22 arises amid a special legislative session, which Governor Jeff Landry has called to address an estimated $700m shortfall in the state’s budget. In his opening remarks for the session, Landry underscored the need to reform what he described as a “bloated” and “out-of-date” tax code.
Alongside the sports betting proposal, Gov. Landry advocates for broader reforms that include implementing flat corporate and income tax rates. His agenda emphasises fiscal stability and modernising revenue systems, aligning with Wilder’s proposed bill.
Following the money trail
Louisiana’s consideration of a 51% tax rate follows a broader trend in the US, where other states have recently enacted substantial tax increases on sports betting. In May, Illinois instituted a tiered tax system that imposes up to a 40% GGR tax rate on the highest-earning sports betting operators.
Ohio also raised its tax rate to 20% as of January 2024. Although New Jersey lawmakers proposed a similar hike, intending to raise the rate to 30%, the proposal has not advanced having faced pushback from the gambling industry.
In each of these cases, industry experts argue that high tax rates could deter operators and encourage customers towards unregulated betting, thereby reducing potential state revenue rather than increasing it.
The financial impact of HB22 on Louisiana’s betting industry would be considerable. During the 2023-24 fiscal year, Louisiana sports betting operators generated $3.04b in stakes and $358.2m in net proceeds.
From this total, they contributed $52.2m in tax revenue to the state. The bill’s ban on deducting promotional credits would add to the taxable base, raising taxable revenue to $402.6m based on last year’s figures.
At a 51% tax rate, this would result in a tax liability of $205.3m — an increase of 671.6% compared to the current rate.
Even without promotional credits, applying the new 51% tax rate to the existing net proceeds would yield $182.7m in taxes, a substantial hike from the $52.2m currently contributed.