The co-chairs of the Congressional Gaming Caucus, which include a Pennsylvania congressman, have proposed bipartisan legislation to repeal the federal excise tax and head taxes on legal sportsbooks.
PA Congressman behind the tax repeal effort, AGA backs efforts
Guy Reschenthaler (pictured), a Republican who represents a suburban Pittsburgh district, joined Dina Titus, a Democrat from Nevada, in the repeal effort, which is being praised by the American Gaming Association (AGA).
Bill Miller, president of the AGA, commented:
“The federal excise and head taxes levied on legal US sportsbooks generate little meaningful revenue for the government. Instead, they place legitimate businesses at a significant competitive disadvantage against illicit gambling operations which skirt taxes and licensing fees. Though originally enacted in the 1950s as a tool to curb illegal gambling, these antiquated federal taxes now give illegal operators a leg up.
“To absorb the unnecessary burden of these taxes, legal sportsbooks are forced to offer worse odds and payouts or reduce investment in promoting legal betting channels to the public. Furthermore, the head tax serves as an impediment to hiring at a time when providing jobs is critical.
“I’m grateful to the Congressional Gaming Caucus’s co-chairs. Eliminating these taxes is a long-overdue step to enable a legal, regulated environment for sports betting that will better protect customers and generate much-needed revenue for state and local economies.”
Handle tax and head tax targeted for repeal
The Internal Revenue Code requires legal betting operators to pay a 0.25% federal excise tax on all wagers — the handle tax. Additionally, a $50 annual head tax is levied for every employee who receives bets. Collectively, the taxes accounted for less than $33 million in federal tax dollars in 2019.
Some types of sports betting, such as betting on horse racing and sports wagering operated by state lotteries, are already exempt.
Sports betting is a low-margin business
Books operate with a very low margin even in the lowest-taxed jurisdictions. In Nevada, revenue is typically 5% of the total amount wagered, before accounting for taxes and expenses.
PA sportsbooks, which include 12 retail sportsbooks and nine online betting sites, have an effective tax rate of 36%.
AGA leader testifies for the repeal effort
The AGA has found that consumers want to wager legally but remain confused about which options are safe and regulated. In his testimony before the Senate Judiciary Committee on Wednesday, Miller encouraged Congress to repeal the excise tax.
The AGA is the premier national trade group representing the $261 billion US casino industry. Legal gambling supports 1.8 million jobs nationwide.
Members include commercial and tribal casino operators, gaming suppliers and other businesses affiliated with the gaming industry.