On 31 July a pair of US senators filed a bill calling for the repeal of the US federal excise tax on gambling. The 0.25% excise tax on the amount of any legal wager is levied above and beyond state taxes.
Senators Catherine Cortez Masto (Nevada) and Cindy Hyde-Smith (Mississippi) filed the bill. Called the “Withdrawing Arduous Gaming Excise Rates Act,” the acronym is “the WAGER Act.” The American Gaming Association (AGA), a trade group, almost immediately came out in favour of the bill. The legislation, the AGA said, would save operators tens of millions of dollars per year in taxes.
“The federal sports betting excise tax was enacted more than 70 years ago as a tool to prosecute illegal sports betting operators,” the AGA wrote in a statement. “Today, with sports betting legal in 38 states and Washington DC, this antiquated tax puts legal operators at a competitive disadvantage and rewards illegal offshore bookmakers that pay no federal or state taxes, offer no responsible gaming tools and have no systems in place to prevent underage customers from using their platforms.”
A second bill addresses the excise tax
The bill will likely have at least one other proponent in congress – Nevada Senator Dina Titus. She has long urged congress to eliminate the tax. Earlier this year, Titus made a presentation before a US house of representatives committee calling the tax a boon for the black market. At the same time, she said, it is a hindrance for the legal market.
And sports betting operators in the US favour eliminating the tax.
“This tax has always penalised regulated operators and rewarded illegal operators who prey on consumers,” Fanatics Betting & Gaming vice-president of government affairs Brandt Iden told iGB. “Repealing this tax is one more step in the fight against the offshore market.”
The bill is now one of two that could eliminate the gambling excise tax or alter how it is used. In January the “GRIT Act,” short for the Gambling Addiction, Recovery, Investment and Treatment Act was filed. That bill would keep the tax in place but would funnel 50% of tax revenue to federal gambling addiction initiatives.
The excise tax has been under fire for several years. When the tax was imposed in 1951, it was initially intended to combat illegal operators. At that time, only Nevada widely offered any kind of gambling. Since then, wagering and igaming have become state’s rights issues. Each state has its own regulatory and tax structures. The excise tax, opponents say, is outdated and serves only to create a federal slush fund.
GRIT Act opponents say now that legal gambling is a state issue and states should fund their own responsible gambling initiatives. Most states dedicate a percentage of gross gaming revenue or a fixed amount for those programmes. The GRIT Act seeks to create federal oversight for responsible gambling.
Removal of tax would create more competitive markets
Because it is applied to handle, the tax amounts to about an additional 5% tax on gross gaming revenue.
“By eliminating the excise tax, we can help lower the tax burden that every sports betting operator pays,” consultant Brendan Bussmann told iGB. “It helps create a more competitive market against the illegal operators that do not pay state or federal taxes.
“The department of justice still has a responsibility to combat illegal gaming and should use every resource to combat these operators and affiliates that support these organisations.”
The gambling excise tax also imposes a $50 “head tax” on gambling employees that companies must pay per employee.
“Nevada is home to multiple championship-level sports teams and we know better than anyone that responsible, legal sports betting can be a great revenue source for our local economy,” Cortez Masto said via a press release. “My bipartisan legislation will ensure our sports gaming industry can provide essential tax relief to consumers and our sports gaming industry, creating more jobs and keeping our tax money in the state while cracking down on illegal activities.”