Sports betting
“If you have a team that is out of it by the second half, or a team that is having a tough year, you can still engage with that team from a prop bet standpoint. Are they going to strike out this player or score a run this inning?” he said. “I definitely think that does help.”
State gets its cut, too
Some of the money gamblers lose on their bets will come back to the state.
The Joint Legislative Budget Committee, which analyzes legislation, estimated sports betting would bring in about $11 million in taxes annually, but calculated that amount based on a tax rate of just 8%.
That is what in-person sports betting will be taxed in Arizona, but mobile betting, which is expected to be 80-90% of wagers, will be taxed at 10%, so that $11 million estimate is likely too low.
Applicants had to pay a $750,000 initial license fee, which comes out to $13.5 million for the 18 licenses from the Department of Gaming, so far. Two licenses set aside for sports venues are not yet allocated.
National analysts at the PlayUSA.com network who calculated financial estimates for the state estimated that tax revenue alone in Arizona would be about $12 million. But that estimate also was based on an 8% tax rate, not the 10% applied to online bets.
Recalculating that estimate with the higher tax rate on mobile bets moves the tax collection figure closer to $22 million, not counting the licensing fees.
No doubt that will benefit the state, but Arizona’s annual budget is approaching $13 billion, making $11 million or $20 million — or even five times that much if the estimates are too low — far less than 1% of the state budget.
Tax estimates are even harder to pin down because of the free bets and the sportsbooks’ ability to deduct those promotions from tax liability.
Even if financial experts can reliably predict how much Arizonans will gamble, and how much they will lose to sportsbooks, it’s difficult to know how aggressive the companies will be with their free-money offers.
Arizona sportsbooks can deduct 20% of their receipts as promotions in the first two years they are open. That figure declines after that, and in their sixth year, they can no longer deduct any free bets from their tax liability.
In other states, the ability to deduct free-money bets has caused tax revenue figures to whipsaw. For example, in February, four of the five licensed sportsbooks in Virginia had a negative tax liability thanks to such deductions, while one of the five paid taxes, according to state figures.
That trend has shifted over the summer, with seven licensed sportsbooks paying a total of about $2 million to the state in taxes in July. But that tax liability was still less than the more than $4 million the sportsbooks offered in promotions, according to state figures.
Six of the seven operators in Virginia are now in Arizona.