Big changes could be coming to the Land of Lincoln’s sports betting tax structure.
To combat an Illinois budget deficit, Gov. J.B. Pritzker wants to more than double the rate sportsbooks pay the state to operate.
A jump to 35% from 15% would provide $100 million in additional funds for Illinois, Pritzker said when he unveiled a $53-billion budget plan with this recommendation that would take effect in July.
“I wish we had big surpluses to work with this year to take on every one of the very real challenges we face,” Pritzker said, according to BNN Bloomberg.
On par with Pennsylvania
Along with extending a cap on corporate tax deductions, the second-term governor says a $721-million deficit could turn into a $128-million surplus at the expense of sports betting operators.
A 35% tax rate would be nearly on par with Pennsylvania, which allows sportsbooks to deduct promotional credits from their gross revenue before paying a 36% tax rate. Illinois does not partake in that advantage for operators.
The increase would still be below the more than 50% tax rate charged in New York, Delaware, Rhode Island, and New Hampshire, but with the growing popularity of sports betting in Illinois, Pritzker's strategy to use sports betting funds to spend more would likely work.
Cutting into profits
This hike likely won’t sit well with the eight online operators and 11 retail sportsbooks as sports betting generated $1.3 billion of operator revenue in 2023.
The state filled its coffers with $150 million of tax revenue after Illinois produced a yearly handle of $11.6 billion.
The Land of Lincoln, where iGaming is not legalized, is one of the top three U.S. markets in terms of handle. Only New York and New Jersey hauled in $1 billion in revenue last year.
A tax hike would cut into the profits of big-time Illinois operators like DraftKings and FanDuel, which dominate the Land of Lincoln landscape, but it could also hurt the ability of some of the smaller operators like Circa Sports and BetRivers to do business in the market.
