Arizona failing to maximize tax revenue?

After legalizing sports betting in Arizona in 2021, the state has since collected more than $35 million in taxes from gambling firm earnings. But, an investigation by Arizona's Family revealed that numerous other states are surpassing Arizona's tax revenue from sports betting in several circumstances.

When the federal legislation that effectively outlawed sports betting in most locations outside of Nevada and Atlantic City was overturned by the US Supreme Court in 2018, it paved the way for regulated gambling across the United States. From that point forward, it was up to each state to decide whether to legalize the practice within its borders.

The COVID pandemic, according to Brianne Doura-Schawohl, CEO of a company that specializes in problem and responsible gambling policies, appears to have accelerated the process of legalizing sports betting. All of a sudden, there were numerous additional requests to take care of -- issues with public health, education, a lot of other new needs, and a lot of lost revenue and taxes, according to Doura-Schawohl. She claimed that opened the door for the gaming sector and those who support it to push sports betting as a new source of income. Doura-Schawohl claimed, “We weren’t really asking the right questions to understand the implications of this expansion.”

By March 2023, sports betting would be permitted in more than 35 states, territories, and the District of Columbia. However, the subsequent revenue stream has changed depending on the state and tax rate. In committee hearings in Arizona, lawmakers discussed the tax rate. Gaming-friendly legislators and lobbyists lobbied for a maximum 8% tax on profits after federal taxes and rewards for promotional bets.

“Anything above 8%, now we’re starting to make the bookie at the end of the bar, we’re starting to make him a lot of money,” said Sen. Sonny Borrelli, a Republican from Lake Havasu City, who was a bill supporter. Borrelli was suggesting that if the tax rates were high, legal gaming enterprises would be unable to function in the state, allowing illegal gambling operations to continue to thrive. In-person sports wagers are subject to an 8% tax, while online and mobile wagers are subject to a 10% tax. Also, they established so-called "free" or promotional bet deductions, which will eventually be eliminated.

There are certain states that have substantially higher tax rates. Illinois levies a 15% tax on gambling winnings. Massachusetts charges a 20% profit tax. New York, Rhode Island, and New Hampshire all tax sports wagering at a rate of 51%. In 2021, Borrelli remarked, "People back east, they raised the tax so high, you know, they made the mafia billions of millions because they, nobody's going to do it lawfully.”

But, it's possible that the prophecy did not come true exactly as planned. Arizonans placed $6 billion in sports bets in 2022. Tax income from that was $28.5 million. With just $861 million in wagers and a small fraction of Arizona's population, New Hampshire made $23 million in tax revenue. Nearly as much was made in Arizona. In addition, New York received a staggering $660 million in taxes from the $14.6 billion in mobile wagers.

There are no bills being discussed in the Arizona legislature right now that would raise the tax rate on sports wagering businesses. The office of Governor Katie Hobbs states that at this time, no changes to the present tax rate are being sought.

Source:

“Arizona missing out on tax revenue from sports gambling” , Morgan Loew, azfamily.com, March 16, 2023.