The association’s advisers, for example, predicted that Virginia could expect $57 million in additional tax revenue per year if it legalized mobile sports betting and applied a 15 percent tax rate. That’s what Virginia did, but over the past 12 months of betting, the state has only taken in $38 million.
Other states with large deficits were Connecticut, Michigan, West Virginia and Wyoming. Overall, tax revenues in the 14 jurisdictions that allow mobile sports betting and have tax rates in the range expected by the Gambling Association were almost $150 million over the trailing 12 months, down from the $560 million the group had forecast The Times notes.
The association defended its estimates. It found that it had at times given lower estimates of the size of the illegal gambling market. And the group argued that it’s too early to tell how much bet or how much in taxes states will collect in the future, and that tax revenues will increase as the market matures. The federation also said some states’ restrictions on collegiate sports betting resulted in lower-than-expected revenue.
But another reason for the deficit, the group acknowledged, was that some states have acceded to the gaming industry’s request for a generous tax break.
To lure customers into gambling, companies routinely offer “free bets” and other promotions, sometimes running into thousands of dollars. Bettors can use these credits to place bets without risking their own money.
At least seven states, plus Washington, DC, have allowed companies to fully deduct these advertising expenses from their taxable income. Several other states allowed partial deductions.
In Colorado, Michigan and Pennsylvania, free bets were so bountiful this year in February — the month of the Super Bowl — that ad spend exceeded many platforms’ revenue, resulting in them bearing tiny tax bills at best that month, according to SportsHandle.