New Jersey took in $302.7 million in tax revenue in 2020 off $2.88 billion in gross operating revenue from casino brick-and-mortar, online casino, and sports betting operations.
That might sound like a lot, but neighboring Pennsylvania collected $1.1 billion in taxes — well more than triple New Jersey’s take — on a slightly lower $2.65 billion from the same revenue sources for the Keystone State’s casinos (plus a small amount from truck stop video gaming terminals and fantasy sports).
The difference, of course, is that New Jersey has some of the lowest gaming tax rates in the U.S., while Pennsylvania has some of the highest.
So is there any groundswell among state lawmakers in New Jersey to try to “catch up,” especially after a year-long pandemic has led to declines in some other sources of tax revenue?
Not at all — not even a little. And the reason lies with the gambling history of both states.
New Jersey, the next Nevada
Back in 1978, Resorts in Atlantic City became the first legal casino outside of the state of Nevada.
The big question back then: How to know how much to tax casinos in New Jersey? Legislators’ answer was simply to follow Nevada’s low-tax lead.
“I didn’t push for sports betting all those years just for tax revenue on that,” Lesniak said. “The primary goal was to save the casinos and the racetracks from bankruptcy — and it worked. It’s a booming business. We’re maintaining open space [through preservation of horse farms] and we’re keeping a lot of jobs.”
Lesniak, an attorney and still a special counsel to the Senate Democratic majority, said he is aware of no consideration of boosting any gambling taxes in the state.
Caputo added that since those first Pennsylvania casinos opened in 2006, the Atlantic City casino industry has been under great stress. In fact, five out of 12 casinos there closed between 2014 and 2016, with Hard Rock and Ocean Casino opening two years later to set the current figure at nine casinos.
“The timing of raising taxes would be off,” Caputo said. “Now is not the time.”
State Sen. Paul Sarlo, whose district includes the Meadowlands Sports Complex, agreed.
“It doesn’t work to overtax casinos,” Sarlo, the chairman of the powerful Senate Budget Committee, told NJ Online Gambling.
To the idea of raising gambling taxes, gaming industry lobbyist William Pascrell III flatly replied, “That’s not going to happen. New Jersey won’t mess with success.”
History lesson
Many veteran lawmakers no doubt recall the last governor to even broach the subject of raising gambling taxes in the state: Jim McGreevey, almost two decades ago.
When McGreevey floated the idea in 2002, industry lobbyists pounced immediately. At the time, the billion-dollar Borgata casino, described as Atlantic City’s first “Las Vegas-quality casino,” was under construction and another similarly sized project was in the pipeline.
A number of other casinos in the city were planning upgrades at a cost in some cases of more than $100 million to compete with the future Borgata. Casino executives warned that if the tax rate was raised once, there was no reason to think that lawmakers might not do the same again, and again.
McGreevey backed down, and in the next few years it seemed like a wise move. Borgata opened its doors to great success, and the industry continued its perfect record of growing annual revenue every year through the 2006 peak of $5.2 billion. Tax revenue, of course, followed suit, and the casino opening and upgrades elsewhere led to more and more jobs — and thus other forms of tax revenue.
A newcomer to the scene is forgiven for wondering if the status quo on New Jersey gambling tax rates, in this era, should be increased. For a variety of reasons, however, there’s no reason to expect that longshot to pay out at the window.
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