Summary: In a report titled Hold Your Bets, the Citizens Budget Commission has provided advice involving the sports betting industry for New York, warning lawmakers to avoid high taxes on the new industry.
Sports betting is thriving in the United States as several individual states have already passed legislation regarding the industry. So far, Delaware and New Jersey along with Mississippi and West Virginia have launched services. For New York, the process of allowing sports betting within the states borders has slowed down. The Citizens Budget Commission recently released a paper to give lawmakers advice as to what they feel legislation involving sports betting should provide. The advice includes avoiding any high taxes on the new industry.
Hold Your Bets
The paper created by the group is titled Hold Your Bets and provides several key points that they feel the New York lawmakers should be focusing on. The group feels that revenue estimates should be conservative, with taxes designed to create a competitive marketplace.
The Commission also feels that the potential impact of sports betting for other gambling activities in the state should also be considered. Legislation should also be considered that takes into account the prevalence of gambling and the social impact cost.
The Commission was created in 1934 and self-describes the group as a nonpartisan and nonprofit civic organization that has a mission to achieve a constructive change in finances and services in the state of New York as well as New York City. The position of the group is to give advance and to help avoid any bad legislation from being created if the state decides to legalize sports betting.
High Taxes Need to Be Avoided
The section involving high taxes in the paper is something that lawmakers should truly consider. Across the United States, sports betting taxes are currently pretty low. In Nevada, the rate is 6.75 while New Jersey has a rate of 8% for casinos and racetracks while online sports betting sits at 12%. In Pennsylvania, the rate has been set at 36% which seems to have kept operators from applying for licensing. Only two operators have filled out applications for sports betting licensing, which is not what lawmakers of the state anticipated.
In New York, the Commission has suggested that because of competition in surrounding states, New York should be sure to set online gambling taxes that will allow the state to remain competitive. High taxes will deter people from entering a regulated market.
With a lower tax rate, operators will be able to spend more on their marketing and customer support as well as investing more in the technology used which will make the market more attractive to bettors. With higher GGR tax rates set, fewer operators will be able to operate in the local industry, which will mean less investment on the marketing and infrastructure side as well as less attractive sports betting odds.
With higher tax rates, fewer people will transition from illegal sports gambling to the legalized option. it would be more profitable for everyone in the long run to provide lower tax rates for everyone involved.
The Commission also pointed out revenue estimates for sports betting should be conservative. In the past, the state has overestimated regarding the gambling industry. For licensed casinos in the state, it was estimated that the gaming venues would bring in hundreds of millions each, yet that has not been the case. The four resorts have only produced $112 million during the 2017-2018 fiscal year.
The Commission providing advice that asks lawmakers to err on the side of caution. It will be interesting to see if they choose to do so and how the state is affected based on what rate is chosen if sports betting is legalized in New York.