Why Online Betting Is Behind Atlantic City Casinos’ Argument For Tax Breaks

You may think a casino arguing for tax breaks on its revenues is something of an absurdity, considering how much wealth is pumped into casino venues every year.

Casinos are some of the most lavish entertainment venues in America and the saying “the house always wins” isn’t exactly false.

Indeed, America’s gambling industry was worth $44bn annually before COVID-19 and is expected to charge past that figure now online gambling is becoming legalized. Do they really need a tax break?

Well, casinos across America are still requesting state governments give them reductions in their tax obligations before deciding whether or not to establish themselves in cities and states. Part of a casino’s bid will be to negotiate the tax relief as a reward for bringing jobs to an area.

Many casino goers may question why these establishments deserve special treatment over other businesses.

And the latest issue around tax relief has risen out of Atlantic City, where the area’s casinos are lobbying for some tariffs to be cut.

Are Atlantic City Casinos Under Threat?

According to one union president Bob McDevitt, tax breaks for Atlantic City’s casinos are necessary to prevent thousands of casino workers from losing their jobs.

Coronavirus caused the temporary closure of Atlantic City casinos during the pandemic and there remains concerns that further restrictions may soon be enacted over the winter months.

Atlantic City bounced back, but casinos across the country are now operating on much leaner staffing numbers, which has impacted on the jobs market.

Meanwhile, outgoing state Senate President Steve Sweeney has been told by casinos that four of the nine gambling houses in Atlantic City are under threat of closure because of the financial strains put on them during COVID-19.

This could threaten thousands more jobs, with McDevitt saying: “As we exit the pandemic and begin the recovery process, it is essential that Atlantic City’s hotel and gaming properties remain stable.

“The choices in my mind are clear: Do nothing and risk the loss of thousands of jobs, or immediately pass this legislation and provide a foundation for stability and growth in the future.”

A proposed bill on the tax break is being considered by state lawmakers. It would mean casinos can make payments in lieu of property taxes to Atlantic City, Atlantic County and the city’s school system.

But perhaps the most crucial aspect of the proposal is that it would strike online sports betting and gambling tax obligations.

Case For Axing Online Tax

The reason why casinos are so keen to reduce their tax obligations from online activity is because of the enormous wealth potential in these revenue streams.

New Jersey casinos pay a 15% tax on online gambling revenue, but only 8% on revenues from land-based operations such as casino halls. That higher tax rate is what the casinos want to cut. 

Online sports betting and internet casino play is legal in New Jersey and accounts for 46% of casino revenues. Casinos are already generating millions of dollars from accepting and benefitting from these online wagers but are therefore coughing up more in taxes.

Naturally the casinos aren’t happy with the higher online rate – and if they can push the state to withdraw these tariffs (or even simply reduce them) from the calculations, then they will likely earn significant financial relief.

And there is some reasoning to their argument. After all, launching an online casino requires millions of dollars in costs, and the proceeds are shared between the host casino, the tech developers, the game providers and many other stakeholders. Yet it’s the casinos who pay the tariff on wagers, which is why they want the relief.

Whether this is successful remains to be seen, but it’s evident that Atlantic City’s casinos won’t give up the fight easily. The bill is now with the state Assembly committee, and needs Senate and Assembly approval before going to Gov. Phil Murphy.