On February 3, Ohio Governor Mike DeWine unveiled his final budget proposal, which includes a significant increase in the tax on sports betting operators, raising it to a staggering 40%. If the state legislature approves this measure, it will mark the second tax hike since July 2023, when DeWine previously raised the rate from 10% to 20%. This shift positions Ohio among the states with higher sports betting tax rates, contrasting with its once more gambling-friendly reputation. Should the new tax rate be implemented, Ohio would fall just short of New York, which currently holds the title for the highest tax rate at 51%. Similar discussions are occurring in Illinois, where Governor JB Pritzker has sought to increase the tax from 15% to a sliding scale between 20% and 40%, impacting the state’s competitive market for wagering operators. Brendan Bussmann, a gambling consultant, expressed skepticism regarding DeWine’s approach, stating, “We have known since day one that DeWine has hated sports betting… it’s a head-scratcher for a Republican that thinks doubling the tax on a business not once, but twice, is a logical answer.”
Funding for Youth Sports and Stadium Construction
In his proposal, Governor DeWine aims to utilize the increased tax revenue for a new “Sports Construction & Education Fund,” with a portion earmarked for youth sports initiatives. One immediate objective for this fund is financing a new stadium for the Cleveland Browns. The team is currently in a legal dispute with the city of Cleveland over the potential relocation of its stadium to the suburbs. The state operates under the “Modell Law,” designed to prevent sports teams from leaving taxpayer-supported venues in their cities. DeWine commented on the influence of the sports gaming industry, saying, “These sports gaming groups are extremely aggressive… it seems only just and fair that some of the stadiums be paid for by them or a portion of it.” According to the budget proposal, this tax increase is expected to generate between $130 million and $180 million in new revenue annually.
Concerns from the Sports Betting Industry
With all major U.S. sportsbooks in Ohio, the proposed tax hike has raised alarms within the industry. Scott Ward, vice president of the Sports Betting Alliance (SBA), highlighted the substantial implications of such a tax increase. “This would amount to a 400% tax increase over a two-year period,” he stated, emphasizing that established businesses shouldn’t have to navigate the uncertainties of government-imposed tax hikes. Ward further expressed concern that the proposed tax rate could lead to inferior offerings for consumers and deter investment in responsible gaming initiatives. Additionally, there is apprehension that higher taxes may drive bettors toward unregulated and offshore betting platforms that do not contribute to state revenue and lack adequate safeguards for responsible gambling. As Ohio considers this substantial tax increase, the outcomes for consumers, operators, and the overall market landscape remain uncertain.
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