Last week, the Baltimore Sun published a story revealing that the state of Maryland could be on the hook for more than $3 billion in payments to victims of child sexual abuse if the courts upheld a law the state’s General Assembly passed two years ago.
That report came less than a week after Gov. Wes Moore unveiled a budget proposal that addresses a projected deficit of $2.7 billion for the upcoming fiscal year. Experts have also said the spending gap could more than double by 2030.
The figure in the second paragraph does not include the figure in the first.
With those large deficits facing state leaders, it makes sense that Moore wants legislators in Annapolis to double the 15% tax that Maryland sports betting operators pay the state, increasing it to 30%. This is among several steps the governor proposes to keep a major tax increase off the backs of most Marylanders, including increasing the tax on table games at Maryland casinos from 20% to 25%.
“It seems like a big jump, but many of our neighboring states are significantly higher than 15% today,” Helene Grady, Maryland’s Secretary of Budget and Management, said at Moore’s press conference unveiling the budget this month. “Pennsylvania is at 36% and New York is even higher, north of 50%.”
Maryland Latest To Weigh Betting Tax Hike
Maryland is not alone in considering a tax hike, as several other states have either approved increases or have proposed them in front of their legislatures.
Ohio Gov. Mike DeWine didn’t even wait a year to call for the state’s 10% tax on operator revenues to be doubled. The tax hike took effect on July 1, 2023, six months after the first sports bets were placed in the state.
Illinois raised its rates last year, going from a 15% levy to a tiered structure ranging from 20% to 40% for each operator based on their revenue. Lawmakers in Louisiana, Massachusetts, Michigan and New Jersey have also proposed sports betting tax hikes.
Ohio’s rate increase did not have an impact on wagering. Buckeye State bettors risked more than $1 billion in November. That’s the first time the state hit that handle threshold since January 2023, the first month of sports betting, and November’s tally featured far fewer promotional credits used to get to a billion (Maryland sports betting promos are also widely available from operators).
Operators reported revenues of $114.2 million, marking the third time they exceeded $100 million in a month in 2024. It was also their second-best month, trailing only the $205.7 million they collected in January 2023.
That first month of wagering generated nearly $20.6 million in tax revenue. Thanks to the tax increase, the state has already exceeded that figure three times, with the $22.8 million in November a state record.
Maryland officials anticipate doubling the sports betting tax will generate $95.4 million in new revenue, which would be nearly 10% of the $987 million in new funding the state expects from all the tax changes. That certainly is possible. However, sports betting operator revenues are contingent on how bettors perform. If the Baltimore Ravens or Baltimore Orioles win on the field, it likely increases the chances their fans win their bets, which means Maryland operators report less revenue.
Still, Maryland sportsbook apps operators and their retail counterparts would have to see their revenues drop by more than half so that the state would not experience an increase in sports betting tax proceeds. With more bettors playing parlays, substantial revenue drops are less likely.
The Cost Of MD Sports Betting Tax Increase
As Grady mentioned, Pennsylvania and New York have among the highest sports betting tax rates in the country. While executives at licensed operators have made clear their disdain for the rates in those states, it has not kept operators and the states themselves from making millions in both.
In December, Pennsylvania reported a monthly handle of $893.4 million. That was down slightly from December 2023’s total of $925.6 million, but still up more than 18% from December 2022’s tally of $754.8 million.
New Yorkers wagered $2.28 billion in December. That was up almost 12% from the December 2023 handle of $2.04 billion and 40.5% higher than the $1.62 billion figure reported in December 2022.
Tax increases in Ohio, Pennsylvania and New York have not impacted betting traffic, but they came at a cost. Data shows that smaller operators have left states with higher tax rates. Those rates make it harder to compete against larger operators that can offer significantly higher promotional offers, such as more lucrative sign-up bonuses or enhanced odds on certain markets.
In Pennsylvania, even the availability of iGaming, or online casinos (some lawmakers in the Old Line State want Maryland online casinos legalized), was not enough to keep operators such as TwinSpires and Unibet from exiting the state. Ohio, too, saw several smaller operators leave after the tax increase. There were 20 licensees there in September 2023, but 16 as of November 2024. The combination of high licensing costs and taxes limited New York to award only nine licenses.
It’s not just Maryland’s smaller operators that could feel the pinch of a tax rate. More traditional operators that focus on lower holds, such as Prime Sportsbook and Circa Sports, would be less inclined to consider a Maryland license, and sports betting exchanges such as Sporttrade would likely be deterred from operating there.
That, though, will probably not be a compelling enough argument to deter lawmakers from approving one of the few tax hikes that will not lead to a huge public outcry.
