Extras on Excise: Do Tax Revenue Jackpots Follow Legalizing Online Gambling?

Successful gambling, as the Kenny Rogers song says, requires participants to “know when to hold ‘em, know when to fold ‘em, know when to walk away and know when to run.” It’s the last clause of those lyrics that states mulling a foray into online gambling might be well advised to heed in light of revenue collections data recently released by New Jersey.  

The state’s Internet gambling tax generated $4.2 million between the last week of November, when it was first available, through the end of February, according to Bloomberg Businessweek. That’s much less than state officials predicted, and it contributed to New Jersey adjusting down its annual state budget this year.  

After originally estimating that online gambling would bring in $180 million in tax revenue in its first year, current revenue patterns have caused state officials to drastically change their predictions—to $34 million in tax revenue for the fiscal year ending June 30, according to another Bloomberg Businessweek story.

Based in part on this and other reports that online gambling is catching on slower than expected, Morgan Stanley issued a note saying it was lowering the anticipated gross revenue brought in by online gambling, according to an article in Time.

In February, as many as 10 states were considering Internet gambling bills, according to CBS News and other major news outlets. With many legislative sessions either well underway or reaching an end, none of those have come to fruition so far.

In Mississippi, the “Mississippi Lawful Internet Gaming Act of 2014,” died fairly early into the state’s legislative session. However, the state has set up a committee that will study how Internet gambling and sports betting are working in other states, according to a Mississippi Gulf Coast newspaper, the Sun Herald. The task force will present its findings by the end of the year, and will not make any recommendations regarding new legislation or regulations.

Other states, like California, may show more promise this year. There, several bills to legalize online poker have been filed, and they may stand a better chance of passage since tribal interests may provide support, according to The Oregonian.

But in the meantime, billionaire Sheldon Adelson is reportedly doing his best to stop online gambling from getting off the ground by leaning on Congress, according to the New York Times. In March, Rep. Jason Chaffetz (R-Utah) and Sen. Lindsey Graham (R-S.C.) introduced the bipartisan H.R. 4301, called “Restoration of America’s Wire Act,” aiming to make online gambling illegal.

Continue the discussion on Bloomberg BNA’s State Tax Group: Do you think more states should legalize online gambling to bring in more tax revenue?

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