New legislation in Maryland raises the tax rate on online sports betting revenue. House Bill 352, which raises the tax from 15% to 20%, was recently signed by Governor Wes Moore. He had proposed a higher increase to bring Maryland in line with some of its neighboring states, but lawmakers negotiated a lower increase. The tax on retail or in-person sports betting will stay at 15%.
Changes in the allocation of tax revenue
The legislation introduces changes in the allocation of tax revenue from sports betting. Five percent of the revenue will go to the state’s general fund. The remaining proceeds from Maryland’s online betting and in-person betting on sports will go to the Blueprint for Maryland’s Future Fund. Since legal sports betting started in 2021, this fund has already received more than $160 million. The funds go to long-term education reform in the state.
The new tax will help Maryland with fiscal challenges
Online platforms currently dominate sports betting in the state in terms of volume and revenue. Governor Moore says the tax hike is necessary to maintain the financial health of the state. He cited the state of the economy and persistent structural deficits as the main reasons for the increase. Maryland’s finances are under pressure not only due to concerns at the state level but also due to the federal economic shifts taking place since Trump became president.
Other states consider similar increases
Maryland’s decision to raise the tax rate on mobile sports betting revenue is not out of line with what’s happening in other states. Ohio and Illinois already have a 20% tax on online sports betting revenue. Pennsylvania taxes online sports betting at 36%. New Jersey’s tax is much lower, at 13% tax on online sports betting.
Other states, like Louisiana and North Carolina, are considering increases. Colorado is set to stop sportsbook operators from deducting promotional bets from taxable income. This will start next July and increase the tax burden for operators in the state. The AI revolution is reshaping many things, including sports betting, and states want to take advantage of the revenue online sports betting can generate.
Sportsbook operators have been anticipating regulatory shifts. For instance, deducting promotional bets could significantly reduce their revenue. Operators that start feeling the impact are likely to find ways to make up the difference, and this could affect bettors.
Sportsbook apps
The profit margin for sportsbook apps is making them a target of politicians. With the US economy’s growth rate slowing down, states are looking for ways to improve their fiscal health. Online gaming is growing at a rapid rate for many reasons, including its convenience.
In Maryland, online sportsbooks are likely to start feeling the impact of the new tax in the next quarter. Those based only in Maryland are likely to feel it more than multistate sportsbooks. In states that have passed similar tax hikes, some of the local books have started to impose a tax on bettors to make up for their losses.
President Trump has repeatedly stated that he prefers states to regulate gambling. Some attempts to make it a federal issue haven’t gone anywhere. The tax rate is something individual states, such as Maryland, must decide for themselves. The tax rate Maryland has set doesn’t appear unreasonable when looking at some of its neighboring states.