Which Online Gaming State Brings In The Most Tax Revenue?Study Outlines Growth In Key States |
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State-by-state legal online gaming officially launched about a decade ago in New Jersey, Delaware, and Nevada, and slowly expanded to other states. Legal gambling-related project Jackpot Sounds recently released an extensive study delving into the growth of tax revenue generated by the industry.
The study looked at key trends, patterns, and economic impacts, including rapid growth in several key states. Here’s a look at some key points.
Pennsylvania Emerges As Trailblazer
The Keystone State has emerged as an industry leader in generating substantial tax revenue from a thriving online casino sector, according to the study. Tax revenue has skyrocketed from $3.1 billion in 2013 to $5.7 billion in 2023, a compound annual growth rate (CAGR) of 12.4%.
The state has seen a consistent upward trajectory, with a particularly significant spike of 78.5% in 2021, “likely attributable to the post-pandemic recovery and resurgence in online gambling activities.” iGaming revenue has played a key role in funding public services, infrastructure development, and other vital initiatives.
The state allows operators to deduct up to a 54% tax on online casino revenue, the highest tax rates in the country. Operators also pay a $10 million license fee. The study notes that “online casino tax revenues from Pennsylvania have become the most important component of the state’s general fund… to provide such critical services as education, infrastructure, and social welfare programs.”
New Jersey: An Industry Pioneer
Recognized for its early adoption of online casinos, New Jersey has also witnessed remarkable growth in tax revenue. That has soared from $214.5 million in 2013 to $493.3 million in 2023, reflecting an average annual growth rate of 9.5%. The study recognized some key insights on the state’s online gambling industry:
The state has a 15% tax rate and that revenue funds public initiatives. An additional 2.5% tax is used to fund programs to prevent gambling addiction and other social services.
“This approach implies that the monetary advantage of the casino industry to the state is not simply confined to handling state issues,” the study reports. “On the other hand, it goes a long way to overcome the possible negative effects on society.”
Michigan: Considerable Growth
Michigan’s journey in online gaming has been marked by remarkable growth with tax revenue of $26.6 million in 2019 rising to $4.9 billion by 2023. This represents an average annual growth rate of 53.4%. The state has also experienced a revenue increase of 5,122.9% between 2020 and 2021.
“Driven by continued expansion and increasing consumer adoption, Michigan has solidified its position as a prominent player in the online gaming ecosystem, consistently generating substantial revenues and contributing significantly to the state’s economic growth,” the study details.
Michigan assesses a 20% tax on the gross proceeds of online casino gambling and a $200,000 licensing fee for the school aid fund, “enhancing the quality of education and fostering a highly skilled workforce, which, in turn, can greatly augment the state’s economy.”
Connecticut: Mixed Results
As a relatively new entrant in the online casino market, Connecticut has seen some ups and downs – from tax revenue of $1.6 billion in 2021 to $998.8 million in 2023. In the initial years following legalization, Connecticut witnessed a massive revenue spike of 3,854.7%.
“Despite a temporary dip in revenue in 2023, the overall impact and growth trajectory signify the robust early growth and promising future prospects of Connecticut’s online casino industry,” the study notes.
The state has a 24% of casino revenue tax with funds earmarked for the general fund for public services and initiatives – from bridge construction to educational opportunities.
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