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Congressional Gaming Caucus Co-Chairs Try Axing Federal Sports Betting Tax, AgainBy Jeff Osienya Mar 26, 2023 LegalityFor the third time, the co-chairs of USA’s Congressional Gaming Caucus are taking another run at doing away with the 0.25% federal tax imposed on regulated sports wagering handle. Will the third time be the charm for the pro-gambling legislators?
The two co-chairs of the US Congressional Gaming Caucus, Reps Dina Titus (D-Nevada) and Guy Reschenthaler (R- Pennsylvania) have introduced a bill to end the 0.25% tax placed on all legal sports wagering handle. Since PASPA’s repeal in March 2018, legal sports betting operators have contributed a whooping sum of $500 million to the federal government in tax proceeds.
In the 2022 calendar year, estimates show that nearly $235 million was paid to federal coffers from the different states with regulated sports wagering. As more and more states join the fold of regulated sports betting, the sum paid out to the federal government is expected to rise considerably in the coming years.
This sports wagering handle tax, however, does not sit right with Rep Titus, who commented that:Quote
“With the explosive growth of sports betting across the country, it’s time to finally repeal the handle tax, which penalizes legal gaming operators and punishes sportsbooks for creating jobs. As co-chair of the bi-partisan Gaming Caucus, I’m pushing this legislation to keep legal gaming markets thriving nationwide and help local economies reap the benefits of this growing industry.”
This Isn’t the First Attempt at Axing the Federal Sports Betting Tax
USA’s Federal Sports betting tax has existed since the 50s, and this latest move by the Congressional Gaming Caucus chairs is certainly not the first attempt to repeal the law. The two co-chairs will, however, hope it will certainly be the last attempt. This dynamic duo was also at the forefront of spearheading attempts to repeal this law in two separate instances, but both failed to bear the fruits, as you can imagine.
In 2020, the two Gaming caucus co-chairs introduced a bill that did not even make it to the hearing stage. Come 2021, a similar fate was handed out to the bill, and now, the legislators will be hoping that the third time is the charm in this scenario.
The Burden of the Handle Tax
While the people who came up with this particular piece of legislation in the 50s harbored good intentions, it can be argued that the tax has hurt those it intends to help. Let’s substantiate this claim. Today’s gaming world is awash with lots of illegal operators who set up shop on offshore locations to avoid the responsibilities that come with a legal standing like tax payment. This tax, for instance, does not factor in these illegal operators.
On the other side of the spectrum, licensed operators bear the brunt of this tax, putting them at a disadvantage against these illegal operators. Moreover, with some casino operators still reeling from the effects of the COVID-19 pandemic, the federal sports betting tax does nothing to help them get back on their feet. So, one may ask, does this tax help the people it was set out to help?
Moreover, part of the reason there is strong opposition to the federal sports betting tax is that its applications are enshrouded in mystery. This is evidenced by Rep Titus telling the Las Vegas Review Journal in 2014 that the Internal Revenue Service (IRS) did not know where the cash went when she asked. So, when even the IRS can’t pinpoint a particular place where the money is channeled, that is undoubtedly a big concern. While the 0.25% tax may not be deemed enough to raise eyebrows at the IRS, it certainly does not fall in the insignificant category, and serious questions must be asked about its usage.
AGA’s Stand on the Legislation
Although the AGA is yet to confirm its stance on the latest try by the Congressional Gaming Caucus chairs, its CEO, Bill Miller, expressed support for the legislation’s repeal in 2021. Mr. Miller highlighted that the tax has placed legally compliant operators at a disadvantage and expressed hope that its repeal would level an imbalanced playing field as he sees it. At that time, Miller thanked the proposers of the bill for a move that he remarked would foster the legal market and offer better protection to customers.
Rep. Titus Taking the Fight to the Tax Reporting Threshold for Slots
Meanwhile, Nevada’s Rep Dina Titus plans to take another swing at the archaic tax formula involving slot machine winnings as she continues her fight against the federal sports betting tax. Under her new proposal, the threshold would be increased from the measly $1,200 it currently stands at to a sizeable $5,000.
With this move, Titus hopes that the process of cashing out jackpots for customers will be more straightforward than it is today. The reason why the tax reporting law is considered archaic today is because of the bureaucracy involved. For example, if you win more than $1,200, the operator involved is required under law to prepare a W-2G form that details the amount the player has won and submit this form to the IRS.
In as much as the policy is meant to increase scrutiny when dealing with large amounts of money, it simply does not fit the mold of today’s gaming operations. This regulation was adopted in 1977 in Nevada when a $1,200 Jackpot could have been considered a big deal.
However, in 2023, it simply makes no sense to continue with a law meant to be effective over 40 years ago. With the economic landscape constantly changing, Rep. Titus hopes this law will be repealed. In an interview with the Las Vegas Review Journal on the matter, she said:Quote
“There was a time when we were trying to get the treasury department to do this through regulation, but they never moved, so we’re going to just push the legislation instead.”
For now, however, it remains to be seen whether her efforts in both these cases eventually bear fruit. So, be sure to stick around, as we’ll always keep you in the loop with any new happenings.
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