Published: March 4, 2023

Amid sports betting debate, experts caution Texas could see $250 million in tax revenue

A powerful pro-gambling group, and former Gov. Rick Perry, project Texas could earn $250 million annually from tax revenue, but some caution lawmakers to note patterns that have played out in state after state.

The revenue projection may not bear out as the bill would give Texas among the lowest tax rates on gambling revenue in the country, according to an analysis by The Dallas Morning News.

Sports betting companies and lobbyists show lawmakers projections of a booming economy should a legislature legalize sports gambling. But once states did legalize it, the projections failed to bear out, often leaving lawmakers disappointed.

"I would caution that the gambling promoters and their lobbyists will, I believe, overstate the revenues that will actually end up in the state treasury,” said Rep. John Carmichael, a Kansas Democrat who voted to legalize sports betting in his state last year. "You’ve always got to take these things with a grain of salt.”

Texas’ potential windfall of $250 million annually comes from research firm Eilers & Krejcik, which estimates that the state could see $2.7 billion in gross gaming revenue — the amount that would be taxed. That means Texans would have to lose almost $3 billion dollars for the state to match the projected tax revenue.

That projection hinges on Texas doubling the record for the highest amount any state has ever seen in gaming revenue. New York holds that record at $1.36 billion.

Rep. Jeff Leach, R-Plano, and Sen. Lois Kolkhorst, R-Brenham, authored sports betting bills this session, signaling that the effort is gaining momentum among the Republican-led Legislature. House Speaker Dade Phelan, R-Beaumont, and Gov. Greg Abbott have also expressed interest in expanding gambling.

The legislation is backed by the Texas Sports Betting Alliance, a collective that includes prominent sportsbook operators and all of Texas’ major professional athletic teams and their powerhouse owners, including the Dallas Cowboys owner Jerry Jones and Dallas Mavericks owner Mark Cuban. Perry is the group’s spokesman.

But the bills set a tax rate at 10% on the amount of money a gambling operator gets from people’s losses. States such as New York, Rhode Island and Pennsylvania have tax rates as high as 51%, allowing them to bring in hundreds of millions of dollars in tax revenue.

A 10% tax rate is favorable for gambling operators because it allows them to reap more money in profits. However, the more operators can bring in with profits, the less Texas will see in tax revenue with a lower rate. The bills earmark money raised through sports betting for public education funding and to the Texas Education Agency for property tax relief.

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