Louisiana house committee defers decision on 51% tax increase

Governor Jeff Landry called the special session in an attempt to overhaul the state’s tax system, including a potential income-tax reduction and adding sales tax to more goods and services.

Wilder’s bill, HB22, would increase the tax rate on digital sports betting revenue from 15% to 51%. The attempt is part of a trend in the US. At the behest of Illinois Governor JB Pritzker, lawmakers there raised the wagering tax from a flat 15% to a sliding scale of 20%-40%. That went into effect in July.

A year earlier, Ohio Governor Mike DeWine was the architect of an increase in his state from 10% to 20%. In May, one Massachusetts lawmaker proposed raising the tax there from 20% to 51%, but that bill was rejected by the state senate.

High New York rate only works because of volume

The fact that the 51% number is often pitched seems to indicate that lawmakers from other states covet New York’s tax rate. The biggest state in the US with a legal, competitive betting market, New York has nine digital platforms and 20 million residents. Operators are turning a profit there, but as representatives from Caesars Entertainment pointed out today, that is due to volume. By comparison, Louisiana’s population is 4.5 million.

Caesars New Orleans general manager Samir Mowad testified that his company has poured billions of dollars into the state in capital improvements. He said the Caesars brand, and in particular, its flagship New Orleans locations, brings in customers from across the US and the world. The state is reaping the tax benefits of that, he said, as well as from customers at their Baton Rouge and Bossier City locations.

Wagering isn’t the only kind of gambling in Louisiana

But proponents of the bill were heated and animated in their arguments for raising the tax, saying that the gambling industry must pay for the harm it creates. One representative clearly showed that he is in agreement when he said that as a lawyer, he’s seen families in which children don’t get “Christmas presents because daddy spent the money gambling.” And other cases in which grandparents are raising their grandchildren because the parents became addicted to gambling.

That said, legal sports betting and casino gambling aren’t the only kinds of gambling available in the state. Louisiana has multiple horse race tracks, bingo halls, video lottery machines at truck stops and a state lottery. HB22 would only raise taxes on sports betting revenue.

Two proponents who represented problem and responsible gambling efforts suggested that an increase in the tax rate would mean more dollars and programs for those initiatives. Under the current law, 2% of sports betting tax revenue or $500,000, whichever is greater, is earmarked for problem and responsible gambling programs. While an increase in tax revenue would mean more revenue for PG and RG programs, lawmakers could also increase that contribution by amending the current law to funnel more dollars to those programs.

iDEA: Proposal a ‘counterproductive shift’

While lawmakers and some stakeholders favor the wagering tax, operators are staunchly opposed.

“The introduction of HB22, proposing a staggering tax increase on Louisiana’s sports betting industry, marks a drastic and counterproductive shift in policy,” Jeff Ifrah, co-founder of the iDevelopment and Economic Association (iDEA) said in a statement yesterday (12 November). “This measure, if passed, will make Louisiana one of the highest-taxed sports betting markets in the country, significantly undermining the competitiveness of legal operators in the state. Such a sharp increase would not only raise costs for operators but ultimately impact consumers, who will bear the brunt through less favorable odds and reduced promotional opportunities.”

New York is one of five states with a tax rate of 50% or more, but the only one with an open, competitive market that includes national operators. In Delaware, New Hampshire and Rhode Island, operators agreed to pay the high tax rate in exchange for monopolies. In Arkansas, no national operators entered the state.

Mowad and Louisiana Casino Association executive director Wade Duty spent considerable time refuting arguments from proponents and fielding questions from lawmakers. After one proponent said that those gambling in Louisiana “lost” $3 billion per year, Duty pointed out that that number was not a loss — it was the amount bet.

Operators on average, pay back 7-10% of the amount wagered to winning customers. In turn, if $3 billion were wagered, the state’s 20 casinos and digital betting platforms would have gross gaming revenue of $300 million. And Duty said that money isn’t a “loss,” it is the cost of entertainment.