New Jersey’s state budget proposal for 2025 does not include an increase in tax rates on revenue for online casinos and sports betting. This is a relief for the online gaming industry in New Jersey after recent increases in other US states.
Discussions are coming up
In April, Senator John McKeon introduced a bill to raise the online gambling tax rate from 15% to 30%. The online sports betting tax rate would increase from 13% to 30%. The bill wasn’t in time to make a difference to the 2025 budget cycle. McKeon believes there will inevitably be changes to the tax rates for online gambling in New Jersey in the future.
New Jersey – a model for online gaming
New Jersey led the legal challenge to overturn the Professional and Amateur Sports Protection Act (PASPA). It was the first state to launch competitive online gaming and provides a model for other states to use. When the pandemic struck, New Jersey was the envy of some other states as online gambling revenue continued to come in and even increased.
Online operators feel the heat
In 2019, online casinos became legal in Pennsylvania, with a 54% tax rate on online slots. Online sports betting in New York has a 51% tax rate. Other states are following suit, and Ohio’s tax rate for online sports betting is now 20%, double the previous rate. Illinois recently increased its online sports betting tax rate from 15% to a graduated rate starting at 20%. With how tax works, it can reach as high as 40% on large amounts of revenue. McKeon says it is clear that New Jersey’s tax rate is too low. When initially setting the tax rate, there were no numbers to measure it against.
Open dialogue
Sen. Ray Lesniak and Asm. Ralph Caputo participated in the passing of the original legislation to legalize online casinos and sports betting. Caputo thinks Senator McKeon is on the right track but he wants some open dialogue between the industry and the legislature. This will help determine how to move forward in a way that’s fair and sustainable for all parties. It’s important to figure out how high tax rates can go without hurting the online gambling industry.
Lesniak believes the health of the gaming industry in New Jersey is more important than chasing after more tax dollars. He says that raising the tax rate will reduce revenue at casinos and racetracks and that racetracks in particular can’t afford that. He says the reason he fought so hard for the legislation in the first place was because casinos were struggling and racetracks were about to close down. Racetrack owners say they rely on sports betting revenue to make up for horse racing losses.
The future of the gaming industry
With the use of AI, particularly in the online gaming industry, a revolution is taking place. Games are becoming more interactive and immersive all the time. Live dealer games give online players a similar type of experience to playing in a brick-and-mortar casino.
McKeon doesn’t believe saving Atlantic City is a priority. He wants New Jersey to prepare for a gaming future that might not focus as much on brick-and-mortar casinos. His perspective is that there are too many physical casinos in Atlantic City and most who go to them tend to be older generations. They aren’t young people who would rather play games on their mobile phones. McKeon says he is not a futurist but believes most brick-and-mortar casinos are going to close.
Bill S3064 has received more attention since Illinois raised its sports betting tax rate. Discussions are likely to take place that could convince New Jersey legislatures to increase the take rate in the next budget cycle. They could produce a figure that would benefit the state without hurting the online gambling industry too much.
