Louisiana is the latest state to bid for a massive sports betting tax hike, with Representative Roger Wilder using the state’s special session to file a bill proposing a huge increase in the gross revenue tax to 51%.
Louisiana currently levies a 15% GGR tax on online sports betting licensees. Should Republican Representative Wilder’s HB22 pass it would bring the state’s tax to the joint-highest level in the US alongside New York.
In addition, the bill aims to put a halt to operators offering promotional credits to players. Currently promotional play is permitted and credits can be deducted from Louisiana licensees’ tax calculations. Operators handed out $44.4 million in promo credits during the state’s 2023-24 fiscal year, ending 30 June 2024.
Filed yesterday (10 November), HB22 currently sits with the ways and means committee. Wilder sits on that committee in the house. It requires a two-thirds majority in the house and senate to pass.
“You’re going to kill the goose”
Early industry reaction is predictably negative. “There’s only so many times you can go to the golden goose before you kill the goose and this is one of those time when you’re going to kill the goose,” said Brendan Bussmann of B Global Advisors in the wake of Wilder’s bill.
“It comes back to the industry having to educate legislators on sports betting and how misnomers in sports betting continue to drive a wedge in reality.”
Wilder’s bill was filed during a special legislative session – Louisiana’s third of the year – in which the governor, Jeff Landry, is backing a sweeping tax reform package to plug an estimated $700 million hole in the state budget.
Landry is also backing a reform of the state tax code, arguing in favour of flat corporate and income tax rates.
Opening the session he told lawmakers: “This tax code is bloated, this tax code is broken, this tax code is incredibly out-of-date and this tax code is holding back our state.”
After Illinois, does Louisiana herald more pain for US sportsbooks?
Wilder’s proposal to vastly increase Louisiana’s sports betting tax marks the latest attempt by lawmakers to generate more revenue from the vertical.
Illinois was arguably the nadir – so far – with a tiered tax system implemented in May that hiked a 15% GGR tax for all operators to 20% for the lowest earners and 40% for the biggest in the market. This followed Ohio doubling its sports betting tax rate to 20% of GGR from January 2024.
A similar attempt in New Jersey currently appears stalled. Senator Jon McKeon’s SB3064 proposed doubling the Garden state’s tax rate to 30% of GGR and was formally introduced April, although it has not progressed since.
The industry is vociferously opposed to these increases, warning that it ultimately undermines the legal industry to the benefit of illegal competitors.
How the hike would increase Louisiana sports betting tax take
For Louisiana’s 2023-24 fiscal year, running to 30 June 2024, operators generated $3.04 billion in stakes and net proceeds of $358.2 million for the state’s sports betting licensees. This included promotional deductions totalling $44.4 million.
From these net proceeds, operators paid $52.2 million in taxes to the department of revenue.
Under the 51% tax rate, however, the industry’s tax burden would increase significantly.
Including the $44.4 million in promotional spend, taxable revenue would come to $402.6 million. The new tax rate would mean operators would have been on the hook for $205.3 million in taxes, a 671.6% hike.
Based on the $358.2 million in 2023-24 net proceeds, the 51% tax would have meant operators paid $182.7 million in taxes.
“It seems strange to me that Republicans in Louisiana are looking to increase taxes over 300% on the industry,” said Fanatics vice president of government affairs Brandt Iden.
“Especially since, coming out of this election cycle Republicans secured significant political victories by focusing on bolstering the economy and low tax rates. Just seems oddly counterintuitive to me.”
