New Jersey igaming operators could be in for a significant financial hit, as a new Bill introduced before State Senate looks to increase taxes on NJ online casino games (including poker) and sports betting.
Bill S3064, which was introduced by Sen. John McKeon, would see all online gambling operators taxed at a flat rate of 30%, a huge increase compared to the current numbers.
While the Senator’s office has not yet made any comments on the Bill, the full text of S3064 is now available, and does not include any reasoning behind the tax hike.
Yet, Sen. McKeon, who serves as the vice chair of the Senate Government, Wagering, Tourism & Historic Preservation Committee, seems adamant about pushing the legislation which would make New Jersey online casinos pay significantly more in the years to come.
Significant Spike in Tax Rate Possible
At this time, New Jersey online casinos pay a 15% tax on their revenue, with an additional 2.5% going to the Casino Reinvestment Development Authority, for a grand total of 17.5% in taxes.
On the other hand, New Jersey sportsbooks pay 13% in base taxes and an extra 1.25% to the Authority, totaling out at 14.25%.
NJ online casinos have generated well over $1.3 billion in taxes since their inception in 2013, while NJ online sportsbooks have contributed an extra $438 million, making a serious contribution to the state budget.
Yet, these numbers could seem insignificant compared what may come, with the new law suggesting an increase to 30% across the board.
iGaming Taxed at Higher Rates in Other States
One of the reasons for McKeon’s new Bill and suggestion of increased tax rates may be the fact that operators in other states, including those neighboring New Jersey pay quite a bit more.
For example, Pennsylvania online poker rooms pay only 16% in taxes, but casinos pay 54% in taxes on their revenue from online slots, while sportsbooks are charged 36% of their grand total.
In comparison, these numbers would make even the new 30% tax rate seem quite reasonable, as only NJ online poker rooms would pay more than those in PA, and those make up only a small portion of the overall igaming revenue anyway.
In neighboring New York, online sportsbooks pay a massive 51% of their revenue to the state, which means NJ sportsbooks would still be in a good shape compared to their neighbors.
New Regulation Up for Debate
Of course, S3064 is currently just a proposal and will have to be debated in both Houses before it becomes law. Like many Bills before it, this one could also end up not coming to fruition if legislators decide there is no legitimate reason for a tax spike.
Yet, given the tax rates on online gambling in surrounding state, the proposal may well find a lot of interested parties among the legislators, who may see it as a good way to ramp up the state budget by taxing the companies who have little recourse but to continue operating despite the potential increase in operating costs.
