Louisiana Sports Betting Tax Will Increase...Yet

A bill that significantly raises the Louisiana sports betting tax paid by licensed operators in the state is being deferred amid push-back from key stakeholders.

House Representative Roger Wilder, the person most responsible for steering the initiative, requested the deferment. His proposal reportedly has plenty of bi-partisan support. But the push to dramatically increase taxes for online sportsbooks in Louisiana has received criticism from the betting operators themselves.

Immediately, the deferment comes as a major blow for Louisiana sports betting tax revenue projections. Wilder proposed increasing the tax rate from 15 percent all the way up to 51 percent. That uptick was estimated to create another nine-figures worth of revenue for the state.

Still, the bill was almost designed to stand out in a way that garners opposition. At present, online sportsbooks in New Hampshire and online sportsbooks in Rhode Island are the only operators subject to a tax rate as high. Not even online sportsbooks in New York pay as much. Along with online sportsbooks in Delaware, operators in The Empire State get taxed at a 50 percent clip.

Did Wilder set his expectations for Louisiana sports betting taxes too high? Does this deferment mean the initiative is effectively dunzo? And what is even the primary form of criticism circulating around this proposal? Let’s dig into the details.

Expect the Louisiana Sports Betting Tax Bill to Resurface at Some Point

Although the Louisiana sports betting tax hike was not popular among online operators, state legislators showed tons of support across both ends of the political spectrum. This all but guarantees it will return at some juncture.

Heck, Wilder may not have even asked for deferment if he had more time before the special legislative session ends on November 25. As Piper Hutchison of FOX News 8 writes:

“House Bill 22 by Rep. Roger Wilder (R-Denham Springs) would have increased state revenue by $151 million, according to an analysis of the bill by the nonpartisan Legislative Fiscal Office. The proposal would have helped offset the loss of revenue resulting from flattening the state income tax. The bill, which was part of Gov. Jeff Landry’s tax code overhaul package, had bipartisan support but was deferred at Wilder’s request at Wednesday’s hearing of the House Ways and Means Committee. Wilder said he would continue to work on the proposal, but it is unlikely to come up again in the current special session that must end by Nov. 25.

“‘I have some learning to do,’ Wilder said. ‘I look forward to hearing the testimony from the industry, to gain a deeper insight of what the industry has with respect to their needs and their concerns on this issue.’”

It is not immediately clear when those discussions will take place. But they can happen at any time. We have seen Massachusetts sports betting regulators, for instance, schedule special meetings to discuss gambling limits. Something similar can happen with Louisiana sports betting regulators.

Do We Know Why Sportsbooks in Louisiana Oppose the Tax Bill?

At least part of this answer is obvious. While online sports betting in the United States is growing in popularity, operators are still running a business. No matter how well they are doing, they won’t actively want to increase their expenses.

Yet, tax adjustments are a way of life. Especially in the sports betting industry. Operators likely would not staunchly oppose a slight increase. But Wilder’s plan increased their current tax rate by 340 percent. That number is massive on its face. It is even larger when put into perspective.

Online sports betting sites in Louisiana have reported annual profits between $250 million and $300 million since the state launched legal wagering in October 2021. Tax that at a 15 percent clip, and they’re giving $37.5 million to $45 million to the state each. Increase the Louisiana sports betting tax to 51 percent, and they would be responsible for paying somewhere between $127.5 million and $153 million in tax each year.

No company, across any industry, is green lighting that type of proposal willingly. Now, it would be different if Louisiana has all the leverage in these negotiations. But as the deferment proves, they do not.

Does Louisiana Have The Leverage Necessary to Raise the Sports Betting Tax?

Bigger markets reign supreme for online sportsbooks in the USA. And Louisiana does not rank absurdly high within that pecking order.

The Bayou State ranks 25th in total population, according to StatsAmerica.org. That puts them directly in the middle of the pack. And that is not good enough. If they want to more than triple the tax rate for online operators, they need to be inside the top 10, if not the top five.

Granted, this raises an interesting question: How did smaller markets such as Rhode Island and New Hampshire end up taxing online sportsbooks at 51 percent clips? The answer is rather simple: Timing is everything.

Rhode Island and New Hampshire were among the early states to legalize sports betting. The Supreme Court of the United States overturned the Professional and Amateur Sports Protection Act back in 2018. Both Rhode Island and New Hampshire had live sports betting before 2020.

During that period, online sportsbooks in the U.S. were more likely to ink agreements that included higher taxes or the ability to increase initial rates. They just wanted to get their operations live.

The landscape has since changed. Nearly 40 states have legalized some form of sports betting, and more than half of those offer online options. Online sportsbooks now have more options than ever. They can push-back against tax hikes without threatening to undermine their entire business. This is especially true in small and mid-markets that don’t make up huge chunks of their overall revenue.

Louisiana May Need to Adjust Sports Betting Tax Approach

Of course, this is not to say Louisiana sports betting regulators have zero leverage.

Sportsbooks want to operate in their market. And they likely will agree to a higher tax rate.

But if any increase is going to be successful, it will likely need to be much smaller than the one Representative Wilder has put in deferment. So, expect this topic to be revisited during the next round of legislative meetings.

And then expect the next proposal to look much different than this one.

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