Arizona Eyes Betting Tax Hike, But Only for the Top Dogs
Arizona Proposes Tiered Tax Increase on Sports Betting
Arizona is contemplating raising its sports betting tax, aligning with a growing trend seen across the United States and internationally. However, unlike many regions that apply uniform tax increases, Arizona’s plan targets only the largest sportsbooks with higher rates.
Governor Katie Hobbs’s Tiered Tax Plan
The proposed budget for 2027, introduced by Governor Katie Hobbs, suggests implementing a tiered tax system on sports betting operators. Under this structure, the biggest sportsbooks would face a significant tax rate hike up to 45%.
This approach is motivated by observations that a small group of major operators attract the bulk of betting activity. With relatively low privilege fees and substantial tax deductions, these top companies have reported record profits in the industry.
To address this imbalance, the proposal recommends adjusting the tax framework to impose a heavier burden on large operators while maintaining lighter rates for smaller businesses.
Details and Ambiguities in the Proposal
Currently, Arizona taxes sports betting revenue at a flat 10%. Under the new plan, smaller operators—those generating less than $75 million in average monthly revenue—would continue paying 10% for online betting and 8% for physical locations.
Operators exceeding the $75 million threshold would face the increased tax rate of 45%, representing a steep jump designed to level the playing field.
The budget emphasizes that this tiered system aims to protect smaller operators and tribal gaming entities that rely heavily on these revenues.
Nevertheless, some industry experts have noted the proposal’s wording is unclear. Considering Arizona’s average monthly betting revenue is just over $80 million, it’s possible the term “average monthly revenue” actually refers to betting handle or volume rather than revenue. Clarification from lawmakers is still pending.
If betting handle is the measure, major sportsbooks like FanDuel, DraftKings, BetMGM, and Fanatics—each with recent handle figures above $75 million—would be impacted.
The 45% tax rate would significantly reduce Arizona’s attractiveness to large sports betting companies, effectively increasing their tax burden by 35% compared to the current rate.
Context: Increasing Tax Pressures on the Gaming Industry
Arizona’s proposal comes amidst a broader wave of tax increases across various states in the US, with some still considering similar changes to their gaming regulations. Internationally, regions like the United Kingdom have also raised wagering taxes, posing ongoing challenges for the gaming sector.
