A new budget plan from New Jersey Governor Phil Murphy, that includes a 25% hike in the tax rate on iGaming and online sports betting, has triggered criticism from the Casino Association of New Jersey (CANJ).
Currently, New Jersey collects a 15% iGaming tax and a 13% online sports betting tax. The hike to 25% is estimated to add an extra $402.4 million in revenue by 2026.
CANJ's president, Mark Giannantonio, is concerned about the negative impact the tax hike could have on Atlantic City's gaming and tourism industry, saying the move is intended to generate more revenue but threatens the financial well-being of the casino industry and its workers.
In response to the proposal, Giannantonio warns that increasing the tax could lead to decreased revenue for land-based casinos and reduced consumer spending at casino properties and other Atlantic City local businesses.
“A tax hike in this difficult economy would threaten these benefits and negatively impact the operations, workforce and marketing of our casino hotel properties. Reductions in these benefits will also lead to reductions in consumer spending in the casino properties and other Atlantic City businesses, as well as the state and local taxes generated there. New Jersey’s standing as a national leader and pioneer in online gaming would also be greatly diminished, and would cede ground to other states in jobs, investment, and innovation,” Mark Giannantonio said.
Atlantic City Not Yet Stable
The president of CANJ further notes that the casino industry in Atlantic City has not yet overcome the effects of the COVID-19 pandemic. Although the combined gaming revenue for January was reported at $553.9 million, a modest 0.9% drop compared to last year, most of Atlantic City's casinos are still yet to reach pre-pandemic revenue.
Giannantonio warns that increasing the tax levy at this moment may risk the financial health of land-based casino resorts, leading to layoffs and a drop in overall economic activity within the region.
One of Giannantonio's chief complaints is that the tax increase could discourage investment in Atlantic City's gaming industry. He asserts that sports betting and online gaming have been significant reasons for keeping the industry going and have made the state competitive in the gaming sector.
Additionally, Giannantonio illustrates that tax increases elsewhere have produced dwindling returns.
“Further, as evidenced in other jurisdictions, this type of tax hike will not yield such expected tax dollars to the State Treasury because it will result in diminishing returns through a consumer shift away from the licensed and regulated providers and back to the unregulated and illegal, offshore online businesses from which the state derives no revenue,” Giannantonio added.
In these situations, not only is the revenue lost by the state but also the customers miss out on protections and sustainable gambling policies provided by the licensed operators.
