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Opposition to New Jersey Governor Phil Murphy's proposed 25 percent tax rate on mobile sports betting and online gaming is mounting as lawmakers and gaming industry executives believe the increase threatens the industry's stability.
Murphy proposed the increase as part of his executive budget proposal, which was unveiled on February 25.
Currently, iGaming is subject to a state tax rate of 15 percent, while mobile sports betting is taxed at 13 percent.
According to the Murphy administration, the increases would generate more than $402m in new tax revenue.
“I can’t say we were shocked about it because we did get a heads up,” said Bill Pascrell III, a partner at Princeton Public Affairs Group. “The reason this is very troubling, and we should all be focused on (is) New Jersey got it right.”
In 2013, New Jersey legalized iGaming, which Pascrell admitted was more profitable for the state than sports betting.
“I think the governor is desperate to balance this budget,” Pascrell said during a panel discussion on Tuesday (March 4) on the proposed tax increase at the Gaming Law, Compliance, and Integrity Bootcamp at Seton Hall Law School in Newark, New Jersey.
“He has a structural deficit of just over $3bn, but he also has with the current budget he proposed a $6.7bn surplus,” Pascrell said. “My first argument was cut $6.7bn down to $6.3bn and let's be done with it; let’s get rid of the tax (increase).”
David Rebuck, former director of the New Jersey Division of Gaming Enforcement (DGE), agreed that he was not surprised by the proposed tax increase due to the state’s significant budget deficit over the next two fiscal years, but “what was surprising was the size of the increase”.
Rebuck, who joined Pascrell and Dennis Drazin, a partner with Drazin and Warshaw as well as CEO of Monmouth Park racetrack, for the discussion, reminded attendees that gaming has always been considered a tool of economic development, whether that’s the casino industry or racetracks.
“The brick-and-mortar side of the house in gambling has always needed additional assistance to maintain itself in an extremely competitive region,” Rebuck said. “Online gaming and sports betting were designed to help those industries and not close. Because we have seen without that they were closing.”
Rebuck asked those who say New Jersey’s tax rate is too low and not generating enough tax revenue to take a step back and understand what the effective tax rate is for casinos and racetracks.
“When I say effective tax rate, not just federal taxes … look at what state law and regulations require for these institutions that control gambling,” Rebuck said. “What do they have to pay beyond the 13 percent and 15 percent for online gambling? They have licensing fees every year, responsible gaming assessments every year (and) regulatory costs.”
Rebuck noted that total is over $70m annually in direct payments to the DGE and the New Jersey Casino Control Commission. New Jersey operators also pay further investment taxes of 1.25 percent for sports betting and 2.5 percent for iGaming, as well as a 5 percent mandatory capital expenditure on their properties.
“When you compare us to neighboring states, there are a couple of things New Jersey has done that they haven’t,” Rebuck said. “We don’t permit corporate tax breaks. We don’t allow for tax benefits for such things as comps or promotions. They are taxable.”
So, if you compare New Jersey to the 36 percent tax rate in Pennsylvania, Rebuck said, “we don’t have credits they do.”
“So, if you need an apples to apples comparison with other states, we are probably still lower, but the gap is definitely reduced,” he added.
Drazin told conference attendees how his company was building a new $20m retail sportsbook at Monmouth Park with Caesars Entertainment. He admitted that he was unsure whether they would have broken ground on that if they knew the tax rate was going to climb to 25 percent.
“We rely on sports-betting revenue,” Drazin said. “Racing loses money. With sports-betting revenue, we make a little money. We are going to continue to be hopeful that there is no increase in the tax rate.”
Legislative Opposition, Support For Tax Increase
Two members of the New Jersey Senate Budget Committee have issued a joint statement in opposition to Murphy’s proposed increase in the online sports betting and gaming tax.
Murphy’s proposal was included in his Summary of Budget Recommendations for fiscal year 2026, but has not been included in any budget bills.
“Simply put, doubling the tax rate on online sports betting and iGaming is putting a New Jersey success story at significant risk,” wrote Senators John Burzichelli, a Democrat, and Michael Testa, a Republican.
“Any effort to increase this tax on New Jerseyans threatens all of the progress New Jersey has made, especially at levels that would make New Jersey's customers too heavily taxed. A tax increase would negatively impact jobs, industry investment, and our New Jersey customers, and it could affect future revenue growth for the state.”
"We look forward to working with the governor, the legislature, and all stakeholders to ensure the sports-betting industry continues to thrive in New Jersey,” the senators wrote.
However, Senator John McKeon, a Democrat, was quick to support Murphy’s proposed tax increase, saying it was an issue he has “championed for over a year now”. He stressed that raising tax rates will help New Jersey’s financial stability.
McKeon filed S3604 last year that would raise the online sports betting and iGaming tax rate to 30 percent. The bill was referred to the Senate State Government, Wagering, Tourism & Historic Preservation Committee but has not been heard.
“Online gambling and sports-betting companies have not paid their fair share in taxes,” McKeon said.
