At the end of last week, the US Congress has introduced a federal sports betting bill that seeks to repeal the excise tax on legal sports bets. This was decided in a bid to remove a 0.25% federal on all sports betting activities handled in the US.
The bill, titled HR 7790 was introduced by Representatives and co-chairs of the Congressional Gaming Caucus Guy Reschenthaler and Dina Titus. If passed, the bill would also remove the requirement that sportsbook operators pay $50 per employee tax annually.
Favouring the fair play
The chair representative Titus stated that the return of sports is a perfect opportunity and timing to address the tax, which by her statement, only served to penalise legal operators and not illegal competitors. Abolishing the tax will push more consumers out of the black market and into a regulated market. Forcing sportsbooks to pay more taxes is counterproductive for the business when gaming establishments are making announcements about layoffs and closing venues. Reschenthaler added that the bill comes at a time when so many employees in the industry are struggling because of their job positions. Eliminating the employee tax would loosen up and encourage the business to work on the growth and improvements.
The AGA President and chief executive Bill Miller also pointed this sentiment. We reported just last week about their betting market research which found that over half of consumers who placed bets to unlicensed platforms in the US, didn’t know they had gambled illegally. Miller added that the federal excise and taxes imposed on legal US sportsbooks generate little meaningful revenue for the government. On the other hand, they place businesses at a competitive disadvantage against shady gambling operations which skirt licensing fees and taxes.
Time for new strategies to take place
The tax was first introduced in 1951 and did not apply to horse racing and state lotteries. This law generated $13.1 million in taxes just for 2019 in the State of Nevada. However, according to the representatives, the Internal Revenue Services (IRS) couldn’t answer how the money was being used. Although originally established in the 50s as a tool to curb illegal gambling, today looks and functions in an outdated manner and does not respond to the new, progressive, online betting platforms and providers.
Supporters of the legislation say illegal offshore bookmakers which don’t pay the 0,25% tax benefit from not playing by the rules. As a result of this, legal sportsbooks are forced to offer unattractive, worse offers and payouts, or reduce marketing budget.
Sportsbooks are already a very low margin business, even in the lowest-taxed jurisdictions. The revenue stands typically around 5% of the total amount wagered which is why 0.25% - while minimal to the federal government- is very important to sports betting operators.
Miller adds that illegal wagering operators, in general, have virtually no tax or regulatory compliance outlays. Gaming is a vital economic driver in states like Pennsylvania and New Jersey, supporting over 30.000 jobs. The bill will further help to pave the way for economic growth and job positions throughout the States. Excluding the federal excise will allow legal, regulated sportsbooks to more effectively compete on the market.