Pritzker proposal would more than double sports betting tax rate

Illinois Gov. J.B. Pritzker is willing to bet an increase that would more than double the tax rate on sports gambling won’t negatively affect an industry that generated more than $150 million in revenue for the state in 2023 alone.

Tucked into the Democratic governor’s recent fiscal year 2025 budget plan is a proposal to begin taxing profits from sportsbooks at 35% instead of the current 15%. Pritzker said the move is expected to generate an additional $200 million a year in tax revenue.

It’s one of several “revenue adjustment” ideas in the budget plan that could help generate nearly $1 billion extra for the state in the coming year, according to the proposed budget.

“From Day One, Gov. Pritzker has taken action to ensure corporations are paying their fair share,” said Alex Gough, the governor’s press secretary. “Since the legalization of sports betting in Illinois, gaming companies have enjoyed one of the lowest sports wagering tax rates in the nation. In that time, the sports betting industry has exploded, and corporations are raking in huge profits.”

However, some tax policy experts and Republican legislators are concerned it might hinder growth of the industry, reduce odds for bettors and open the door to illicit bookmaking.

“The most likely result in the short term is bettors will get worse odds because the sportsbooks will want to make their money back,” said Adam Hoffer, director of excise tax policy at the Washington, D.C.-based Tax Foundation. “But there are long-run effects as well, where you might see it deter other companies from opening (sportsbooks) in Illinois, which would hinder competition.”

Currently, 30 states impose taxes on sports betting. At 15%, Illinois’ rate is lower than only eight other states. Louisiana, Maryland and Virginia also tax sportsbook profits at 15%, according to the Tax Foundation.

But states including New York, New Hampshire, Delaware and Rhode Island all charge 50% or more.

“I can’t believe every state hasn’t brought it up to 51% like New York,” said Alan Woinski, president of Gaming USA Corp., a Florida-based gambling industry consulting and market research firm.

“I’m not a fan of tax rates being raised for anything, but the industry kind of brought this on itself,” he added, referring to how high rates have not deterred sportsbooks from opening in New York.

Woinski said there was a lot of concern about the effect such high tax rates would have on sportsbooks in those states when they were implemented, but none came to fruition.

“New York’s making more money than ever,” he said.

And sports betting has gotten more lucrative for Illinois in recent months as well.

In December 2023, the month with the most recently available tax collection data from the Illinois Gaming Board, the state collected more than $19.2 million from sports betting. That’s 14% higher than the next most lucrative month, October 2023.

Most sports betting is done through online apps, gaming board records show. Less than $4.9 million of the $150.3 million in sports betting tax revenue generated in 2023 was from bets made at physical sportsbooks.

Unlike revenue generated by the current 15% tax rate that goes into the state’s capital projects fund, new money from the additional 20% would go into the state’s general fund to help finance education, health care and help cover costs associated with the state’s migrant crisis.

In addition to the proposed increase on the sports betting tax rate, Pritzker’s FY25 budget proposal to raise revenues next year would also include a cap on the retailers’ sales tax discount, which Pritzker said would generate $101 million extra for the state and $85 million for local governments.

Pritzker is proposes extending the $500,000 annual limit on corporate net operating loss tax deductions for at least three more years. This would provide the state with $526 million more during the next fiscal year, according to budget estimates.

Senate Minority Leader John Curran contends the state should be reining in spending, not increasing it.

“The governor’s inability to control his spending is now turning into a very aggressive tax increase on a new Illinois industry,” the Downers Grove Republican said. “Regardless of where you stand on sports betting, raising taxes by nearly $1 billion to pay for nearly $1 billion in spending on noncitizens is unfair to hardworking Illinois families and businesses.”

State Rep. Dan Didech, a Buffalo Grove Democrat who chairs the House Gaming Committee, said discussions are “very preliminary” about raising the tax rate on sports betting.

“But I’m open to it,” he said. “The rationale is we’re under a substantial amount of budgetary pressure this year in a way we haven’t in previous years.”

The legislature usually takes until late May to finalize the state’s budget and there have been no committee meetings regarding the proposal to increase the tax rate.

“It’s a little premature to say whether it’s a good idea or a bad idea,” Didech said.