New York sports betting tax revenue from online wagers dwarfs the same in other states. It doesn’t dwarf the state’s actual income and expenditures, though. If anything, New York’s overall fiscal status makes the tax haul on sports betting look minuscule.
New York has already broken the record for sports wagering tax revenue in a year’s time, with most of 2022 yet to play out. It will need to grow exponentially over the final months to really make a dent in the state’s need for funding, though.
New York sports betting tax surpasses expectations
In less than half of a year, sports wagering has produced $267 million in tax revenue for New York. The vast majority of that, $263 million to be exact, has come from online bets. That’s a record-setting amount for any state in just over five months.
It’s also already gravy for 2022, with most of the state’s fiscal year still ahead of it. For the first year of legal online wagering, New York’s budget estimated it would receive $249 million. Thus, it’s already surpassed that expectation.
As legislative attempts to lower the national-high 51% revenue share that online sportsbook operators are paying out to the state have failed for this year, New York could see the highest-ever sports betting tax haul for a year ever by the time the dust settles on 2022.
There’s little doubt that the state is thus far achieving its objective of capturing as much revenue from online sports betting as possible. It’s important for New York residents to understand just how significant that revenue is in terms of the big picture.
Putting the New York revenue in context
The total of New York’s expenditures for the 2022-23 fiscal year comes to $220 billion. Thus, the amount of sports betting tax the state has collected so far would cover less than two percent of those costs.
At this point, the tax revenue from sports betting would not be sufficient to cover many of New York’s line-item expenses. Those include:
$4.5 billion for the state’s Housing Capital Plan
$1.6 billion in grants for “health transformation capital”
$800 million for the Emergency Rental Assistance Program
$500 million for electric school buses
As already noted, though, the year is not over. The funding from this source still has time to grow. It’s likely to do that by a significant margin. This year will yet see the onsets of the 2022 college football and NFL seasons.
It’s difficult to forecast exactly how much new revenue those events could bring in. That’s because the revenue share percentage could act as both a strength and a weakness of New York’s system.
The drawback of New York’s 51% rate
The current revenue share arrangement means the state gets the biggest cut of any hold the sportsbooks amass. At the same time, it could act to limit the amount of that win for sportsbooks.
New York’s online sportsbooks all maintain that currently, they’re operating at a loss under the present conditions. Some of them have already cut back the other spending they can control to account for the high tax rate.
For reference, neighboring New Jersey assesses just a 13% rate on revenue from online sports bets. One of the main expenses that New York sportsbooks have reduced their spending on is advertising.
That includes buying less advertising space. It also includes cutting back on the frequency and value of promotions aimed at getting new customers to sign up. While it might ramp those efforts back up to some degree when football season comes back around, the question is to what extent.
The issue is simple math. 51% of a smaller pot could actually work out to be less than 35%, for example, of a much larger pot. Without frequent and lucrative promos this fall, that might work out to be the case.
New York’s ability to depend on sports betting taxes seems firm. It just shouldn’t count on them to be a significant revenue source in the context of its overall budget. It’s unlikely to ever tread into that stratosphere.