A study by the Tax Foundation found that sports betting taxes vary widely across the US. The study was conducted in 18 states that offer sports betting. The study found that taxes in Michigan, Pennsylvania, Colorado, and Michigan are relatively lower than the statutory rate.
The four states allowed sports betting providers to deduct advertising costs, which include free bets and bonuses, in order to reduce their liability. Virginia, Colorado, and Pennsylvania also allow operators to deduct federal excise tax. Virginia even allows a deduction for losses.
According to senior policy analyst Ulrik Boesen, deductions are challenging to forecast sales. In Colorado, for example, in 2019 voters approved sports betting to fund the state’s water plan. The state estimated it could raise $ 16 million annually for the first five years.
However, Colorado raised only $ 6.6 million in fiscal 2020 through 2021. Colorado charges sports betting at a rate of 10 percent, but only 4.47 percent is effective. Michigan 8.4 percent is only effective at a rate of 3.28 percent.
In the US, 21 states have legalized sports betting. However, only 10 states have legalized sports betting operations. Boesen believes that states that have passed a law to legalize sports betting should pay attention to how tax policies work in other states.
Boesen also calls for states to levy high taxes on sports betting revenues, suggesting that states with a low tax burden could create more economic activity.
“Countries with a low tax burden can generate more economic activity. The countries with the highest per capita trade all have relatively low tax rates. “