Industry frustration continues over the 51% tax rate on New York online sports betting.
Brandt Iden, head of US government affairs for Sportradar, shared his thoughts during the NCLGS Summer Meeting in Boston on Sunday.
“The New York model is problematic, and we’re seeing that now,” Iden said, before continuing sarcastically. “And by the way, surprise — (a) 51% tax rate and all of a sudden we’re shocked that operators are not profitable in New York. … It just doesn’t work.”
NY sports betting driving record tax revenue
Iden’s comments — echoing those of several executives in the New York online sports betting industry — came just days after Gov. Kathy Hochul touted the Empire State collecting a record $302.3 million in tax revenue in less than six months (98% of that goes toward educational funding).
All nine of NY’s approved legal online sports betting operators are now live, with Bally Bet NY launching its app last week.
“In just six months, New York has become a leader among states in implementing successful gaming policies, with hundreds of millions of dollars going to important government programs that will improve the lives of New Yorkers,” Hochul said in a news release.
“The recent launch of New York’s final sports wagering operator will provide key revenue for education, youth sports programs, and problem gambling support. I look forward to continuing to enact responsible gaming policies that provide exciting entertainment for New Yorkers of legal age — all with important safeguards in place to help those who need it.”
Lawmakers balancing tax revenue vs. friendly tax rate
Sen. Joe Addabbo and Assemb. Gary Pretlow attempted to implement legislation that would lower the 51% tax rate as a result of adding more operators. But their bill was rejected in this year’s session. Both lawmakers — assuming they win re-election — plan to revisit discussions during next year’s session.
“It’s difficult for me to change the law and take money from school kids (98% of tax revenue from online sports betting goes to education) and give it to millionaires,” Pretlow told PlayNY. “It’s hard to explain that if we give them some (promotional) money back, we’ll make more because total revenue will be higher.”
Morgan Stanley reported that the average American tax rate on sports betting is 19%. New York also does not allow for deductions on promotional spending, which, when combined with federal tax, equates to a 77% rate, Morgan Stanley said.
Iden: Single-digit sports betting tax rate makes most sense
A compromise of sorts that would allow for deductions on promotional spend while keeping the 51% tax rate might mean more promotions for players to keep the market growing.
“I think that single-digit tax rates make the most sense (for states),” Iden said. “The average in the industry is about 20%. I still think that’s too high. This is a low-margin industry, and we’ve got too many states that are talking about these exorbitant double-digit tax rates that just really don’t make any sense for the industry.
“So when you come in and you pile on the taxes — then you’ve got the excise tax — and then whatever else, you’re stuck with in the process and then you’ve got operate with salaries and staff, it’s very unsustainable.”
Iden continued:
“And we’re now building this industry around this and states are going to rely on these tax dollars at some point in time. I know they’re not currently having to rely on them because they’re making so much money from the feds. But at some point this is going to be something that states really need to rely on, and in order to that they’ve got to take a second look at the tax rate.
“So I hope that states would go back and start to think about does this high tax percentage make sense and can we go back and reduce this in some capacity? Unfortunately, I’m skeptical about that states only typically have a tendency to push tax rates in one direction which is up. But at the end of the day, I hope we can get more realistic about where we’re at.”
