Louisiana lawmakers have temporarily sidelined a bill that would increase the state’s sports betting tax to the nation’s highest rate. A legislative hearing Wednesday reaffirmed that discussions around the topic were far from over.
A bill that would increase Louisiana’s 15% tax rate on operator gross gaming wins to 51% was deferred by its sponsor during Wednesday’s hearing. The legislation would also strip sportsbooks of the ability to deduct taxes on free bets and other promotional expenses.
The proposed rate would tie New York, Rhode Island, and New Hampshire for the highest levy among the 39 states that have approved legal sports betting. New York is the nation's most populated state with competitive legal sports betting while Rhode Island and New Hampshire only permit one operator apiece.
Rep. Roger Wilder III, the bill's sponsor, said he understood the differences between Louisiana sports betting's competitive structure and the high-rate states, and that he likely wouldn't push for such a high level going forward. In testimony opening discussion of the bill, he questioned why the sports betting rate was 15% while the state's truck stop video poker terminal operators paid 32%.
"I firmly agree with the fact that our constituents in Louisiana have the opportunity to have entertainment and do as they please," Wilder said. "I don't want to deter that so we weren't trying to harm that. But I go back to saying that currently the format is not a win-win."
Louisiana’s 15% sports betting rate is above the national median average. The bill was, not surprisingly, opposed by gambling stakeholders before and during Wednesday’s hearing.
“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,” said Jeff Ifrah, founder of gaming policy advocacy group iDEA, in a letter published before the hearing.
Caesars New Orleans general manager Samir Mowad joined other opponents testifying against the bill Wednesday.
“If you were given one set of expectations and made one set of investment in technology, in people, in a platform, at an expected tax rate of 15% and a couple of years later, you're now looking at having that anywhere from doubled to more than tripled, it makes it a very difficult environment to operate in this business,” Mowad said.
Louisiana gaming context
Wednesday’s hearing comes during a special legislative session as lawmakers look to reduce the state income tax levels, requiring new tax streams to maintain spending levels.
As in many other states, “vice” industries such as gambling are among the leading targets for tax increases. Louisiana’s online sportsbooks generated roughly $367 million in revenue in 2023, contributing more than $43 million in taxes.
That figure was a fraction of a percent of the roughly $50 billion spent in the state’s more recent annual budget.
Want to know why a #sportsbetting tax hike in #louisiana is bad policy? Read @iDEA_Growth's submitted testimony to lawmakers. https://t.co/Im55Jvlp9A
— John A Pappas (@yanni_dc) November 13, 2024
TLDR version:
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??Counter to Louisiana’s Legacy of Pro-Growth Policy
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The proposed tax increase comes as a portion of lawmakers remain opposed to gambling in any form. Rep. Michael Johnson argued the tax increase was necessary to pay for societal ills caused by gambling and that rate could be even higher.
Testimony from Johnson and other influential Republicans in the GOP-controlled legislature reiterated the bill’s deferral Wednesday was likely temporary. If lawmakers don’t take up the bill again in the special session, they will likely at least discuss further in the regular session set to commence in April 2025.
National impacts
The tax discussions in Baton Rouge come as more statehouses discuss sports betting tax increases.
In the past two years, Ohio doubled its sports betting tax while Illinois created a tiered system that significantly raised rates on high-grossing sportsbooks. An ensuing feared wave of rate increases didn’t materialize in most other state houses in 2024, but gaming stakeholders are preparing for further discussions when most states begin their respective legislative sessions early next year.
Mobile sportsbooks hold about 10% of bets, lower rates than many other gambling forms. Combined with taxes, product investments and other expenses, mobile sportsbooks are a fairly low-margin industry. More than a dozen sportsbooks have ceased operations in the past five years and eight books now hold more than 99% of the national market share.
Increased taxes, the industry fears, will prevent any new market entrants and curtail profit opportunities for most if not all existing operators.
Sports betting companies have tolerated the relatively low margins largely over hopes more states would legalize more lucrative online slots and table games. More than a dozen states have considered iGaming, including Louisiana, but only four have competitive iCasino markets.
Online slots have been derailed in part due to industry opposition over fears that online gaming will take away revenue from brick-and-mortar gaming. Proponents must also deal with conservative, anti-gambling opposition in most statehouses, a reality echoed again by Wednesday’s hearing in Louisiana.
Bottom line
Massive potential sports betting tax increases and few opportunities for new online gaming options have increased stakeholders' worry about the long-term sustainability of the digital gambling industry.
