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The current 15% tax rate on revenue from licensed online casinos in New Jersey will be a thing of the past if the state enacts the governor’s budget proposal for fiscal year 2026. Gov. Phil Murphy’s submission calls for raising that tax rate to 25%. Online sportsbooks would also pay the same rate.
Murphy’s proposal is not the first of its kind but does represent less of an increase than legislators have pushed for. If Murphy’s plan is adopted, New Jersey would be just the latest US jurisdiction to raise taxes on gaming licensees’ revenue.
Murphy budget breaks down tax increase proposal
In New Jersey as with many other US states, the process of formulating a budget for each fiscal year begins with the governor. For FY2026, Murphy’s proposal cites a need for additional revenues and explains that increased need is behind his suggestion of hiking online gambling tax rates.
While revenue from online casino play is currently assessed at the 15% rate, New Jersey takes a 13% cut of taxable revenue from online sports wagering. Should the legislature approve this part of Murphy’s budget, the rates for both verticals would be a uniform 25%.
The budget proposal claims that would result in an increase of over $400 million for the state between the general fund and the casino revenue fund. The plan follows action in the legislature toward a similar end by less than a year.
New Jersey senator pushed for tax hike in 2024
In April 2024, New Jersey Sen. John McKeon filed a bill to raise the tax rate for online gaming to a uniform 30%. However, the final budget for FY2025 did not include the measure.
Even then, McKeon spoke of a rate hike seeming inevitable with the state’s financial need that Murphy refers to in his FY2026 budget.
That does not mean that the legislature is necessarily wholeheartedly welcoming the increase. A statement from two of the New Jersey Senate expresses concern that a tax increase would harm long-term revenue growth.
As the legislature debates this issue along with all the other proposals in Murphy’s budget, New Jersey is not alone in seeking additional revenues from legal online gambling.
New Jersey could follow other states’ examples
Within the past year, Illinois and Ohio both enacted significant tax rate bumps affecting online sports wagering within their borders. Earlier this month, Maryland Gov. Wes Moore proposed doubling the rate for online sports betting revenue there as well.
In all of those states, the rationale behind the proposals or actual increases was similar to what Murphy has referred to; greater costs. Although these hikes are unpopular with gaming licensees, their pleas may soon prove insufficient to maintain the 15% tax rate on iGaming revenue in New Jersey.
