For the second straight year, a bipartisan effort is underway in Congress to eliminate a decades-old federal excise tax placed on legal sports wagers.
Rep. Dina Titus, D-Nevada, and Rep. Guy Reschenthaler, R-Penn., introduced the legislation Thursday to eliminate 0.25% tax on sports wagers, which is often referred to as the handle tax.
The fee was put into place in the 1950s to combat illegal gambling activities. But the lawmakers said the tax only penalizes legal sports betting operators.
Rep. Dina Titus, D-Nevada
Titus and Reschenthaler, who are co-chairs of the Congressional Gaming Caucus, introduced a similar bill a year ago, but it never received a hearing.
Legal sports betting is now operating in 22 states with another four states expected to launch the activity in time for football season in the fall. Another 16 states have active or pre-filed sports betting legislation.
“As more states recognize the benefits of legalizing and regulating sports betting, repealing the handle tax will create jobs in Southern Nevada and across the country,” said Titus, whose district includes the Las Vegas Strip.
Illegal offshore sports betting operators, that accept wagers over the internet, skirt paying the handle tax or any other tax because they are not regulated.
Rep. Guy Reschenthaler, R-Penn
“The industry is hindered by an outdated tax code and burdensome regulations that penalize legal, regulated operators while providing illegal operations with an unfair advantage,” Reschenthaler said. He noted that legal gaming operations in Pennsylvania have a $6.34 billion economic impact in the state and supports more than 33,000 jobs.
“The bill will ensure the gaming industry, hit hard by COVID-19 mandated closures and the cancellation of sporting events, is able to support good-paying jobs and economic growth in southwestern Pennsylvania and across the country,” he added.
Titus first sought to repeal the handle tax seven years ago, going back to when Nevada was the only state with legal sports betting operations.
In 2019, gaming establishments in Nevada paid about $13.3 million in handle taxes – the most of any state. When Titus once sought to find out how the federal government allocated the money it received from the tax, “The IRS couldn’t answer how the money was being used.”
Certain types of sports betting, including betting on horse racing and sports betting operated by state lotteries, are already exempt from the handle tax. Businesses that pay the excise tax must also pay an annual $50 per employee tax on those who work in sportsbooks.
“The handle tax punishes legal gaming operators and encourages consumers to place bets illegally,” Titus said. “At a time when Las Vegas is experiencing the second-highest unemployment rate of any large metro area in the country, forcing sportsbooks to pay an additional tax on each employee makes it harder to bring about economic recovery.”
Titus expressed optimism the effort to repeal the tax might be successful this time around.
After she addressed the House Ways and Means Committee last month about repealing the handle tax, the American Gaming Association voiced its support for the effort.
On Thursday, AGA CEO Bill Miller expressed his gratitude that Titus and Reschenthaler were taking up the cause once again.
“While the federal excise tax’s original purpose was to punish illegal operators, this antiquated tax now aids the offshore, illegal market and disadvantages safe, legal and regulated sportsbooks nationwide,” Miller said in an emailed statement. “If Congress wants to position the legal sports betting market for success, it needs to eradicate this unnecessarily burdensome tax to level the playing field for legal sportsbooks.”
Pandemic-related closures and COVID-19 operating restrictions sent the commercial casino industry to a 31.3% gaming revenue decline in 2020. Sports betting, however, expanded and flourished. The activity accounted for $1.53 billion in revenues, according to the AGA, a nearly 69% increase over 2019 when 13 states offered sports betting.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
