Virginia Bill to Amend Operator Deductions and Loss Carryover

Hawaii’s 55% Tax on Consumer Betting Winnings Is a Tough Sell

America is still feverish with the showdown during the Super Bowl LVI, which saw the Cincinnati Bengals lose in a soul-crushing three-point difference the last stretch, making the Los Angeles Rams this year’s Big Game champions. Some of this must have rubbed off on Hawaiian lawmakers as one of them decided to act and bring up the topic of legalizing sports betting in the Aloha State yet again. 

Time to Act on Sports Gambling in Hawaii 

To Rep. John Mizuno, it’s all a wasted opportunity not having legal wagers at home, and while he has slim chances of succeeding, Mizuno is determined to do all in his power to see a sports gambling bill pass through the legislature this year. Hawaii is already making some inroads in the matte. Last month, the state proposed what could be possibly the highest sports betting tax levy in the United States.

Lawmakers supporting legalization floated the idea that the state should charge operators 55%. Mizuno’s bill espouses this same idea, and he seems to feel that the higher tax rate would give an additional incentive among fellow lawmakers to at least stop and think if this would not be a good idea. 

After all, the potential for a steady revenue source is legitimate. Mizuno wants to see an Online Sports Wagering Corp. established, which will allow remote gambling. Should this move succeed, it could be up and running by July 1, but this seems unlikely. Mizuno’s bill is different than what most of his counterparts do in other states.

He proposes that operators should pay a fee but doesn’t specify how much. On the other hand, it seems that sports bettors should be the ones who pay the 55% tax, not the sportsbooks themselves. This actually makes some sense, as the revenue generated by sportsbooks is often just a smidgeon of what the total betting handle is.

Sportsbooks in Iowa generated some $303 million in January but had to pay around $275.9 million back to sports bettors. Instead of taxing the difference that consists of the operator’s revenue, Mizuno wants to go after the much bulkier and far more appealing player winnings. 

Does a Hefty Tax Have a Shot with Operators and Consumers? 

The question is whether this would demotivate sports fans from participating and not reinforce the status quo whereby sports bettors simply opt for offshore gambling sites which offer better odds and no obligation to pay tax, at least in theory. 

Talking to Sports Handle, a leading authority on the sports gambling industry, Mizuno explained his motivation behind the 55% tax. If New York could do it, so could Hawaii, the reasoning went. How this would work is still to be seen in practice, as it’s usually the operators that pick up the tax. 

According to Chris Grove from Eilers & Krejcik Gaming, any confusion at this stage of the bill stemmed from the fact that lawmakers are not always quite aware of how the industry is supposed to work. The bills that hit the mark right from the start are either predicated on the final drafts of other successful bills or simply ask the industry for help. 

Grove argues that Hawaii would have a problem finding online sports betting providers at the cited rate, but he admits that other aspects of the gambling experience, including lotteries, have introduced high taxation successfully. Pennsylvania taxes online slot revenue at 54%, but the bill is footed by operators, not consumers.

Whether a similar approach works with sports betting will be something that will take its time to see into action. Earlier this year, a handful of bills were introduced hoping to also start the conversation and talk about adding sports betting as a way to boost the Aloha State’s tourism industry and limit unregulated sports gambling.