DES MOINES — More than doubling the proposed state tax on casino-based sports betting from 7.33 percent to 17 percent could be a deal-breaker, a spokesman for the Iowa gaming industry said Thursday.
“We believe it would be,” Iowa Gaming Association President Wes Ehrecke said Thursday after the chairman of the House Ways and Means said he wants to tax sports betting at 17 percent rather than the 7.33 percent proposed by the association.
Ways and Means Chairman Guy Vander Linden, R-Oskaloosa, agreed that the higher tax rate could be a deal-breaker, “but I don’t see why the state should tax this less because their profit margin is less.”
The higher tax would make handling sports betting less attractive to Iowa’s state-licensed casinos, Ehrecke said after a subcommittee approved House File 2448 for consideration by the full Ways and Means Committee.
Under the bill, which has been approved by the State Government Committee, the gaming commission could authorize licensed casinos to conduct advance deposit sports betting. Under that, bets could be placed in person at a casino or by telephone or other electronic means.
Any legal sports betting action in Iowa is predicated on a favorable ruling from the U.S. Supreme Court in a case brought by New Jersey challenging a federal ban on states authorizing or licensing sports betting.
Ehrecke laid out a scenario in which the casinos would handle $10 million in wagers, but after paying winners, the nonprofit organizations that hold the casino licenses, and state and federal taxes, the casinos would be left with about $65,000 to pay expenses.
“Out of all that, we’d still have overhead and maybe a slight profit,” Ehrecke said. “There are very thin profit margins in this.”
Vander Linden seemed skeptical.
“These guys are saying sports betting is somehow different from their other games,” he said. “We don’t tax black jack slightly less than we do slot machines. It’s all taxed at 22 percent.
“To me, this is just another piece of their business,” Vander Linden said. “If they choose to take it on and it doesn’t make as much margin as their other games, that’s up to them.”
Sports betting won’t stop if the casinos don’t handle it, Ehrecke said. It’s likely Native American casinos, which don’t pay state taxes, would handle the wagering.
And, he added, illegal betting, which is about 95 percent of sports betting, will continue.
“We’re going to have to try to educate the legislators on the formula and why the formula we proposed works,” he said.
Vander Linden plans to keep the bill moving.
“I know they’re very anxious to get this, but why we should tax it at one-third what we tax everything else, I just don’t understand,” he said.