Tax Rate for Online Gambling in New Jersey Could Increase to 30%

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A general view of the Hard Rock Hotel & Casino and the Steel Pier in Atlantic City, New Jersey. Bruce Bennett/Getty Images/AFP.

A New Jersey senator wants to double down on the state’s tax rate for online casinos and sportsbooks. Newly elected State Sen. John McKeon is advocating for a tax increase on New Jersey’s online casinos and sportsbooks. He has introduced a bill, S3064, proposing to raise the tax rate to 30%.

Taxing Times

The online casino tax rate is currently 15%, with an additional 2.5% going to the Casino Reinvestment Development Authority. This makes the total effective tax rate 17.5%. The proposed change would nearly double this rate.

Despite opposition from the state’s retail casino lobby, the bill is already in its preliminary stages and awaits assignment to a committee. The New Jersey Office of Legislative Services (NJOLS) has yet to review the bill’s text, so there’s only limited information on the Senate website.

What Are Tax Rates for Surrounding States?

Compared to its neighboring states, New Jersey’s online sports betting tax rate appears significantly lower. Operators in New York and Pennsylvania pay the two highest online gaming tax rates in the country, at 51% and 36% respectively. However, it’s important to consider that these states’ allowance for promotional deductions effectively reduces these rates to 24%.

If you’re wondering which states are at the other end of the spectrum, it’s Michigan and Kansas. They have effective tax rates that are less than 6% due to their allowance for promotional deductions.

New Jersey Doing Well With 15% Tax Rate

Despite the discrepancy in the tax rate, it’s not like the Garden State is hurting for tax money. Since online casinos started in New Jersey in November 2013, the state has collected nearly $1.4 billion in taxes from them.

Mobile sports betting was introduced in the summer of 2018. From that time, New Jersey has collected over $438 million in taxes (and that’s not counting the extra rates). Following a record-breaking year in 2023, when New Jersey collected a staggering $128.9 million in sports betting taxes, operators reported an adjusted gross revenue of $1.01 billion.

The momentum doesn’t seem to be slowing down either. In just the first two months of 2024, the state has already amassed more than $31 million in sports betting taxes, indicating that it’s well on track to surpass last year’s record.

New Jersey Not the First State To Consider Increase

Tax rate hikes in the sports betting and casino industries are not exclusive to New Jersey.

For instance, Illinois Governor JB Pritzker has proposed more than doubling the sports betting tax from 15% to 35% in his 2025 fiscal year executive budget. Similarly, Ohio Governor Mike DeWine approved an increase in the sports betting tax from 10% to 20% last year.

So, it’s not the first state to consider increasing the online gambling tax rate, and it probably won’t be the last. Now, we’ll wait to see if the bill gets enough support to start the march to legalization. We’ll keep you posted.