US weighs higher federal tax on sports betting to unlock billions in revenue
A proposed increase in the federal tax on sports betting could bring in billions for the US government. Currently, the tax stands at just 0.25%, but raising it to 5% or even 10% might unlock substantial revenue over the next decade. Analysts suggest the move could offset some declines in betting activity while still boosting public funds.
Sports betting in the US has surged since 2018, with regulated wagers growing 24 times in value. Yet federal tax policy has remained unchanged, leaving potential revenue untapped. The current 0.25% excise tax was set in 1982, following a reduction from 2% in 1974 and 10% before that.
A 5% federal tax could generate around $97 billion over ten years, even if betting volumes drop by 4% annually. Doubling the rate to 10% might raise $182 billion, though bets could fall by 10% each year. Despite these declines, the government would still collect far more than under the existing system.
State-level examples show that higher taxes on sports wagering have not led to sharp drops in bets or revenue. This suggests that a federal increase might not deter bettors as much as feared. Another option—a flat five-cent tax per bet—would raise less than a percentage-based levy but could encourage long-term growth.
The proposed tax hikes would mark a significant shift from the current 0.25% rate. Even with reduced betting activity, a 5% or 10% levy could deliver billions in new revenue. The move would align federal policy more closely with the rapid expansion of legal sports wagering across the country.
