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Stop us if you’ve heard this story before: a state wants to increase its tax rate on legal sports betting. Stories such as these are popping up all over the country.
It seems most states underestimated the appetite for legal sports betting, and are now raising taxes to accommodate. Or maybe, just maybe, many states face huge deficits coming off the global pandemic and need to find extra revenue. Heck, most likely, it’s a combination of both that’s driving this country-wide trend to raise betting taxes.
The state of Maryland is the latest to follow suit, but here’s the thing — its tax hike plan just became official. Keep reading and we’ll tell you how sports betting in Maryland has now changed.
Betting Taxes Increased — But Not By Much
Back in January, we wrote that Maryland Governor Wes Moore was workshopping a brand-new budget for the entire state. In his first proposal, made public, he proposed doubling the tax rate on sports betting. It was a flat 15 percent tax, and he wanted 30 percent.
Welp, Maryland got a tax hike, but not nearly as high as he pitched. During a House Ways and Means Committee meeting, the tax rate was slashed to only 20 percent — well short of 30 percent, but still an increase. The committee approved this with a 13-5 vote, all the while striking a different proposal to increase casino table game taxes to 25 percent from 20 percent.
Of course, that vote is only to get it out of the House committee and to other elected officials. The entire budget — which included other provisions besides just more sports betting taxes — still needed to go through the entire legislative process with a hard deadline of April 7 to pass or not.
The final result? Passed. The Maryland General Assembly approved the state’s budget on the final day of the legislative session that April 7, or “Sine Day” as Moore called it. The budget also upped the tax rate on cannabis sales, a new 2% tax on capital gains on earners over $350,000, and an entirely new tax bracket for top-grossers. Making $500,000 and $1 million is a new tax bracket, whereas before, everything above $250,000 was taxed the same.
The whole budget is geared to close a $3 billion deficit in the state budget. No, that’s not a typo. Yes, it’s really that high of a hole. We get it, the pandemic threw a wrench in everyone’s budget, but getting this high is nearly inexcusable. Now bettors have to pay for government incompetence…
How A 20 Percent Tax Will Affect Maryland
How much more money does Maryland stand to make with a 20-percent tax, not 15 percent? Well, a good chunk of cash, that’s for sure.
Take this past March. In an active month that included the March Madness Tournament, Maryland reported tax revenues of $4.4 million. With an extra 5 percent tax, that number would’ve been close to $6 million. That’s a decent-sized jump in just one month, so imagine an entire year.
Actually, you don’t have to imagine. Through nine months of the last fiscal year, Maryland has banked $65 million in taxes. At 20 percent tax, that number would’ve been a hair above $85 million for an extra $20 million. Not bad, eh?
Maryland’s new tax rates goes into effect next fiscal year. For the state, that’s July 2025.
More Taxes Are The New Norm
As mentioned, Maryland is hardly the first state to bump taxes on legal sports betting. Others are well ahead of them or looking to follow suit.
Take Ohio, for example. In 2023, Governor Mike DeWine didn’t just raise the tax rate — he doubled it, jumping from 10 percent to 20 percent with one stroke of the budget pen. And get this, he tried to double it again this year. That’s right, DeWine proposed cranking it up to 40%. Lawmakers pumped the brakes, though, at least for now. Don’t be surprised if DeWine makes another attempt in the future.
Illinois went for it in 2024, swapping out its flat 15 percent tax for a tiered system that now ranges from 20 percent all the way up to 40 percent for top betting apps like DraftKings and FanDuel. That move rattled some cages across the industry. So much so that DraftKings introduced a betting tax on every betting win. That drew ire before DraftKings scrapped the plan entirely.
Hell, even New Jersey — the state that started the sports betting boom — is getting antsy. Governor Phil Murphy floated the idea of raising online gambling taxes in his latest budget. Early word from insiders? Probably not as drastic as he pitched it, but clearly, lawmakers are warming up to the idea of squeezing a little more juice out of the market.
And they’re not alone. Michigan, Indiana, and a few other states have tossed around similar tax hike proposals. The days of cushy, low-tax sports betting could be coming to an end — and Maryland’s just the latest to pull up a seat at the table.
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