CLEVELAND — As state and local leaders go back and forth over how to best fund future stadium projects in Ohio, Gov. Mike DeWine continues to remind lawmakers there's a simple solution on the table that limits the impact on taxpayers: his proposal to double the state's tax on sports betting from 20 to 40%
DeWine made the proposal as part of his budget in February to use some of the money Ohioans lose to those sportsbooks to fund, in part, future stadium projects as well as youth sports. Sports betting profits totaled $723 million last year, most of which went out of state.
"These are the companies that are taking all of this money outside, draining it outside of the State of Ohio on gaming," DeWine said in February. "They ought to pay their fair share and this would make them pay their fair share."
DeWine told News 5 earlier this year that for over half a century, teams have turned to the state for help in building these stadiums, and it's not like they're going to suddenly start saying no, so why not have a permanent funding source.
"Isn't it better to take that money from the sports gaming companies rather than to take it from the general taxpayers. So this just seems to make a lot of sense to me."
But because DeWine had already doubled the tax on these companies, the idea of doubling it again to 40% was met with legislative pushback.
"You know we started out with a 10% tax on sports gaming, we've not even finished two football seasons and now we're talking about quadrupaling that tax," said State Rep. Brian Stewart, R-Ashville. "I think that's going to generate a lot of discussion."
Discussion that resulted in the house removing the tax hike and instead helping the Browns in the form of a $600 million bond deal, which then prompted similar asks from the Cincinnati Bengals and FC Cincinnati.
"If the Browns are going to get something it is a certainty the Bengals will want money, so will the Reds," and that State Senator Bill Blessing said only balloons the cost.
That's why he's introduced Senate Bill 150, a mirror version of the governor's sports tax proposal, but at a lower rate of 36%.
"You're basically just saying look this is user fee," he said.
One that targets mainly the big online sportsbooks that are out of state, not taxpayers.
"Like FanDuel and Draft Kings are paying this, the rest of Ohio particularly the urban county residents are not going to be on the hook for this which is as it should be," said Blessing.
Facts DeWine said this day, he hopes members of the legislature will soon see and act on.
"I think there's a clear pathway now to get this through and to get this through the Senate and ultimately have it signed into law," said DeWine.
Geoff Zochodne, an industry analyst of Covers.com, said it's unclear if all that much has changed in the legislature to bring about a reversal.
"This effort in the senate, we'll see where it goes but it feels a little bit like we've already had this fight and we'll see if there are some sort of new arguments that can be raised or new allies that can be won over," Zochodne said.
DeWine does not feel the sports betting public will see much of a difference if the tax rate were raised to 36%, which would put Ohio on par with neighboring Pennsylvania and still below the industry leader, New York, which taxes at 51%.
"Population wise New York is just such a huge market for these operators so they were willing to take a bit more of a hit there," Zochodne said. "But I think too there is a bit of remorse on their part for having gone that far because it really is a tough go for them in New York to try to turn a profit."
"We saw already in the wake of the first tax hike [in Ohio] some smaller operators did exit the state," he said.
With roughly 98% of wagers placed online, the brick-and-mortar sportsbooks have had a tougher go. Within the past year, the Caesars Sportsbook at Rocket Arena and the Fanatics Sportsbook at Progressive Field have ceased operations.
New York State's 51% tax on gambling applies to online operations; brick-and-mortar operations are taxed at a much lower rate of 10%.
Blessing said he'd be open to a tiered system in Ohio similar to one adopted by Illinois last year, where the first $30 million in sports betting revenue is taxed at 20%. $30-$50 million is taxed at 25%, $50-$100 million at 30%, and up to a top tax rate of 40% on revenue exceeding $200 million.
"There's a similar idea being floated, which admittedly I'd support," said Blessing. "That gets us an effective tax rate of something like 31%. And mind you DraftKings and FanDuel represent 80% of the market in Ohio. They would be paying the lion's share of that while keeping smaller sportsbooks competitive which is exactly what we want."
"Depending on how we structured it, it could get almost as much as the governor's proposal. I've heard estimates as high as $150 million per fiscal year," Blessing said.
