Lawmakers in North Carolina are currently deliberating a potential increase in the state's sports betting tax rate, joining a growing number of states exploring gambling taxes as a means to address budget deficits.
This discussion revisits a debate from the previous year, during which the Senate proposed a budget that would have raised the existing 18% tax on sports betting revenue to 36%. In contrast, the House supported a budget that did not include this increase, leading to a stalemate between the two chambers.
Recent reports from WRAL indicate that lawmakers are considering a tax rate for sports betting operators ranging from 20% to 30%. These discussions are taking place alongside negotiations for the state budget, which includes planned salary increases for state employees and teachers, while also managing scheduled reductions in income tax.
Additionally, lawmakers have explored the possibility of imposing extra taxes on lottery sales and individual sports bets, similar to the model adopted in Illinois. However, WRAL noted that such proposals may encounter logistical challenges and resistance from bettors.
Legal online sports betting was launched in North Carolina in March 2024, with an 18% tax on gross wagering revenue. Since its inception, operators have reportedly contributed over $287 million in taxes. WRAL indicated that had the state implemented a 30% tax rate from the start, it could have generated nearly $200 million more in tax revenue.
While no formal legislation has been put forth yet, these discussions reflect a broader national trend where lawmakers are increasingly viewing sports betting and iGaming as more politically viable targets for tax increases compared to traditional taxes like income or property taxes.
In the past year, Illinois adopted a contentious per-bet tax structure for sportsbooks, adding a fee on top of existing revenue taxes. New Jersey also raised its online sports wagering and iGaming taxes to 19.75% from 13% and 15%, respectively. Similarly, Maryland and Louisiana increased their sports betting tax rates from 15% to 20% and 21.5%, respectively.
In Ohio, Governor Mike DeWine proposed a significant increase in the online sports betting tax from 20% to 40%, although lawmakers ultimately rejected this proposal. Indiana lawmakers have also discussed potential tax changes related to sports betting.
This year, several jurisdictions have seen similar proposals emerge. Governors in states like Arizona, Illinois, and Michigan have suggested raising gambling taxes as part of their budget plans. An active bill in Massachusetts proposes increasing the sports betting tax from 20% to 51%, which would set the highest rates in the nation. Earlier this year, West Virginia lawmakers considered raising their sports betting and iGaming taxes from 10% to 25%.
In Vermont, lawmakers have also proposed a per-bet tax, while Chicago has moved forward with a city-level tax on sportsbooks.
The prospect of a tax increase has sparked opposition from sportsbook operators and industry organizations. The Sports Betting Alliance, which includes major operators like DraftKings, FanDuel, BetMGM, bet365, and Fanatics, has initiated a campaign encouraging customers to reach out to lawmakers to oppose potential tax hikes. In a text message campaign, the group stated, “Right now, some lawmakers in Raleigh are pushing for a tax hike on legal sports wagering that punishes fans who are just playing by the rules.”
According to WRAL, the alliance argues that higher taxes could ultimately be transferred to consumers through diminished promotions, less favorable odds, or other pricing adjustments.