US Senators propose repeal of federal gambling excise tax, AGA backs move

On Wednesday, US Senators Catherine Cortez Masto (Nevada) and Cindy Hyde-Smith (Mississippi) introduced a bill to repeal the federal excise tax on gambling. This 0.25% tax is imposed on the amount of any legal wager, adding to state taxes.

The bill, named the "Withdrawing Arduous Gaming Excise Rates Act" or "WAGER Act," received immediate support from the American Gaming Association (AGA). The trade group highlighted that the legislation could save operators tens of millions of dollars annually in taxes. 

"The federal sports betting excise tax was enacted more than 70 years ago as a tool to prosecute illegal sports betting operators," the AGA stated. "Today, with sports betting legal in 38 states and Washington DC, this antiquated tax puts legal operators at a competitive disadvantage and rewards illegal offshore bookmakers that pay no federal or state taxes, offer no responsible gaming tools, and have no systems in place to prevent underage customers from using their platforms."

Senator Dina Titus of Nevada, a long-time advocate for eliminating the tax, is expected to support the bill. Earlier this year, Titus addressed a US House of Representatives committee, calling the tax a boon for the black market and a hindrance for the legal market. Sports betting operators in the US also favor the tax's repeal. 

Another bill in Congress, the "GRIT Act" (Gambling Addiction, Recovery, Investment, and Treatment Act), was introduced in January. This bill proposes to keep the tax but allocate 50% of the revenue to federal gambling addiction initiatives. 

The excise tax, established in 1951, was initially aimed at combating illegal gambling operators, with Nevada being the only state offering gambling at the time. Since then, gambling regulation has largely become a state issue, with each state establishing its own tax structures.

Opponents of the GRIT Act argue that legal gambling is now a state issue and that states should fund their own responsible gambling programs. Most states already dedicate a portion of gross gaming revenue or a fixed amount to these programs. The GRIT Act seeks to create federal oversight for responsible gambling initiatives.

Opponents of the excise tax believe that removing it would create more competitive markets by lowering the tax burden on legal operators. The excise tax also imposes a $50 "head tax" on gambling employees, which companies must pay per employee. 

"Nevada is home to multiple championship-level sports teams and we know better than anyone that responsible, legal sports betting can be a great revenue source for our local economy," said Senator Cortez Masto in a press release. "My bipartisan legislation will ensure our sports gaming industry can provide essential tax relief to consumers and our sports gaming industry, creating more jobs and keeping our tax money in the state while cracking down on illegal activities."