Sports Betting Could Lead to More Govt. Spending. How About Tax Relief?

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

I’ll bet there are a number of legislators and interest groups already calculating how they’ll spend new tax revenue now that the United States Supreme Court has ruled that states can approve sports betting. Let’s not count those dollars just yet. If and when the tax money comes maybe it shouldn’t be added to current tax collections but used to reduce other taxes.

The Supreme Court ruled in a case from New Jersey that states could create legalized sports betting if Congress doesn’t ban it. There is a chance Congress will act in some way because major sports leagues are asking Congress for a uniform framework to guide any states that adopt sports gambling.

California could be in line to do so as early as this year. Assemblyman Adam Gray has introduced a constitutional amendment (ACA 18) to allow for sports betting. Should it pass, the voters could see the measure on the November ballot. Estimates put California’s sports betting on the black market in the $20-$40 billion range. Gray has estimated that California governments could reap $100 to $200 million in tax revenue.

Maybe.

There is still the possibility that a black market would take a large share of the business even if it is legalized. Look at the initial results from the tax take from legalized marijuana. Proponents of the initiative that legalized the weed predicted it would produce $1 billion in revenue for government. Yet, the first quarterly tax yield of $34 million puts marijuana’s projected take on track to hit only 13.6% of expected annual revenue.

Another question is whether legalized sports betting would cut into the state lottery’s income if lottery players turn to sports betting to satisfy a gambling urge.

Still, it is likely that sports betting will take root. There is public support for the idea, and while there is the downside of gambler addiction, most voters would see the new revenue coming from individuals who choose to gamble voluntarily.

Since some revenue is expected from the sports gambling where would it go?

Assemblyman Gray spoke of earmarking revenue for education. Other interests would fight for a share.

But California has been pretty proficient lately is raising taxes. Income taxes, vehicle license fees, gas taxes, many local taxes have all gone up and there are plans to raise even more taxes. In fact, the tax increase efforts along with a healthy economy has the state budget in record numbers bulging with a nearly $9 billion surplus. If sports betting becomes a reality, how about substituting the tax take from the sports bet and reduce other taxes? Sell the idea as taxpayer relief. That message should carry the day.

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