New Jersey Governor Defends State Sports Betting Tax Rate

When asked if the New Jersey sports betting tax could increase over time, Gov. Phil Murphy told CNBC that he likes where it's at.

New Jersey Gov. Phil Murphy is still high on his state’s sports betting industry, even as a dozen other states now have legal industries in the aftermath of PASPA’s demise in May 2018.

During an appearance of CNBC’s The Exchange last week, Murphy talked about how he wants the Garden State to be a (actually the) U.S. hub for sports wagering. It’s an ambitious goal, considering market potentials elsewhere in the country are more attractive than New Jersey’s. Right now, there’s a rapid expansion of sports betting. New Jersey is firmly in place as the nation’s No. 2 sports betting market, trailing only Nevada right now, but that likely won’t last for much longer.

The state of New York could easily dominate the Garden State, should lawmakers in Albany legalize online/mobile in 2020 (NY already has retail betting).

“We want the industry to plant their flag here,” Murphy said, which was met by skepticism from the CNBC host.

Defending the tax rate

Since New Jersey began regulating sports betting in the summer of 2018, more than $3.5 billion in bets have been taken. Recent figures show that about 85% of the handle is now via the internet. Unlike Nevada, the nation’s gold standard for sports betting, New Jersey allows bettors to register for online/mobile remotely.

New Jersey’s sports betting tax rate is as follows:

  • 8.5% state for retail revenue
  • 1.25% “additional tax” on retail revenue
  • 13% for online/mobile revenue

The CNBC host said that the money for state coffers doesn’t “move the needle,” as sports betting is already a low-margin business. Sportsbooks typically hold onto about 6% of the handle in the form of gaming win.

“Well, it’s probably a $25 mm to $50 mm revenue item for the state [each year],” Murphy said in response to the skepticism about sports betting’s benefit to his state. “We’ll take every penny of that. It’s the way it’s taxed. It’s one of the rare parts of our state where folks ask us, ‘Why can’t you put more tax on it?’ The fact of the matter is that we think that’s the right rate, and again, the ancillary benefits from this, whether it’s hotels, shows, racetracks, restaurants, is enormously important for us.”

“We don’t have any plans right now to raise” the tax rate, he added. “It’s at a reasonable level.”

The 1.25% additional tax went into effect in December, Sports Handle reported. In other words, it is reasonable to wonder if NJ might raise the rate over time. Neighboring Pennsylvania has a 36% effective tax rate on sports betting revenue, regardless of whether it comes from the internet or a retail book.

NJ sportsbooks paid $2,021,711 in taxes on retail sports wagering revenue through the first seven months of this year. The added 1.25% tax, which goes to shore up the Casino Reinvestment Development Agency for “marketing and promotion” of Atlantic City, isn’t factored into the figures from the DGE, according to a state filing. Mobile sportsbooks paid $13,494,945 through July, state figures also show.


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