Louisiana Weighs Significant Sports Betting Tax Hike to 51%

Louisiana is thinking about a big tax hike on online sports betting that might push its current 15% tax rate up to 51% putting it next to New York and Vermont as the highest in the United States. 

Rep. Wilder Introduces HB 22 to Boost State Revenue from Sports Betting

Representative Roger Wilder III (R-Livingston Parish) brought House Bill 22 (HB 22) to the table during a special meeting to tackle the state’s financial problems, reported West Island Blog. If it passes, this law would increase the tax load on betting companies and change the local sports betting scene.

Wilder’s proposal comes after Louisiana approved mobile sports betting in early 2022, which helped cement its status as the Southeast’s casino center. The industry expanded, but the state now ranks 15th in the country for sports betting handle. This position might drop as bigger states like Florida and North Carolina report more data.

The bill calls for a 51% tax on net gaming proceeds from electronic sports betting platforms. It also aims to get rid of the rule that lets operators subtract promotional credits from their taxable revenue. During the 2023-24 fiscal year, operators in Louisiana gave out $44.4 million in promotional credits. This affected net revenue calculations and lowered the total tax paid.

Wilder’s Proposal Sparks Industry Concerns Over Louisiana’s Sports Betting Growth

Wilder’s bill has caused worry in the industry. People against it say such a high tax rate might slow down growth and stop operators from putting money into the state. 

Brendan Bussmann from B Global Advisors said that raising taxes over and over could hurt the industry in the long run. Bussmann stressed that lawmakers need to understand how sports betting works money-wise hinting that wrong ideas could lead to bad choices in making rules.

Looking at other states shows mixed results from similar tax changes. New York, with its big population, managed to enforce its 51% tax rate even though sportsbook operators complained. But Louisiana does not have such a large population so many doubt if such a policy would work or last in the state.

Experts in the industry point out that Illinois changed its tax system. The state now uses a tiered approach that doubles taxes for big operators like DraftKings and FanDuel. This shift has started talks about whether states are using tax increases to boost their income even if it might slow down market growth.

If Louisiana goes through with its tax changes, it could affect how profitable the local market is. With the new rate, operators would have paid $182.7 million in taxes on $358.2 million of net proceeds for the 2023-24 fiscal year. This is a huge 671.6% jump from the $52.2 million they paid under the current 15% rate.