A tax hike proposed by Sen. John McKeon, D-Essex/Passaic, back in March has not been included in the budget proposal for the 2025 fiscal year.
McKeon introduced a bill earlier this year that would increase tax rates on New Jersey online casinos and NJ sportsbooks to 30%. It would keep New Jersey in competition with states such as Pennsylvania, which boasts much higher tax rates than the Garden State.
The discussion will be tabled until the fall, when the next bill session restarts.
McKeon’s bid to raise NJ online gambling tax revenue falls short
Online casinos and sportsbooks in New Jersey are on the lower side when it comes to taxes. They are taxed at a 15% and 13% rate, respectively. McKeon fully envisions that changing in the near future, despite coming up empty this session, according to an interview he game to PlayUSA.
“I’m disappointed that we didn’t get it done in time to be helpful this budget cycle,” McKeon told PlayUSA.
“But there’s no doubt with the forecast for economic times in front of us that, ultimately, we will make some changes to the online gaming tax rate in our state.”
New Jersey was the first state to launch online casinos in 2013 and laid the groundwork for other states – such as Pennsylvania and Michigan – implement similar strategies.
Sen. Ray Lesniak and Assemblyman Ralph Caputo are responsible for passing the original legislation back in 2013. While there are no regrets, Caputo told PlayUSA:
“Knowing what we know now, we probably didn’t go high enough.”
Caputo does not know how high the number should go. It’s more than likely the tax rate will increase sooner rather than later.
Likelihood online gambling tax rate increases
While taxes won’t rise this year for online gambling, it’s sure to in the years to come. Other states, such as Ohio and Illinois influenced New Jersey’s decision.
For starters, Pennsylvania’s tax rate 54% tax on online slots and 16% for online table games. New York set a rate at 51% for sports betting operators upon launch in 2022.
Then, Ohio and Illinois each adjusted their tax rates after launching sports betting. Ohio doubled its rate from 10% to 20% in time before the last fiscal year. Illinois, on the other hand, went from a 15% to a tier system that could be up t0 40%, especially for top operators such as FanDuel and DraftKings.
After seeing the success each state has, especially Pennsylvania, the market leader in iGaming, New Jersey had ultimately no choice to bring up the discussion.
Operators have one more year to function at the current tax rates, before it’s almost a slam dunk that rates will be increased by the next fiscal year.
