FROM IOWA HOUSE REPUBLICANS:
Legalized sports betting is now in its third year in Iowa, with Iowans and residents of neighboring states taking advantage of this new activity. Legalized betting has also produced a new revenue stream for the state. The 2022 legislative session has brought on a growing discussion on how to utilize these funds. Before any decision can be made on where the money should go, one simple question has to be answered – how much sports wagering tax revenue does the state actually have to spend?
When sports wagering was enacted in 2019, the Legislative Services Agency put out an extensive fiscal note outlining the financial impact of the bill to the state. They estimated that the amount of sports wagering in state would range from $186 million to $560 million annually. With the state assessing a 6.75% tax on the net receipts (after payouts for winning wagers), it was expected that the state would collect between $630,000 and $1.8 million annually.
When added to the revenue collected from the legalization of internet fantasy sports wagering, Iowa’s annual take from the new forms of gambling would expected to range from $900,000 to $2.6 million annually. The tax revenue would be deposited in the newly created Sports Wagering Receipts Fund, where the money would sit until appropriated by the Legislature. Just before the start of the 2019 college football season, legalized sports betting began in Iowa. The data clearly show Iowans seem to really like this new opportunity.
In Fiscal Year 2020 – the first year of sports wagering – the state collected $1.8 million in sports wagering tax. That was a pretty strong number considering that betting on sports wasn’t legal until August and the pandemic hit in March, shutting down most sporting events for months.
In FY 2021, sports wagering tax collections jumped to $6.1 million. And through the first six months of FY 2022, $1.254 billion has been wagered on sports betting in Iowa. This has generated over $4.9 million in sports wagering tax collections.
With sports wagering such a popular activity in the state and generating tax revenue well in excess of what was projected, a simple question arises – how much sports wagering tax money does Iowa have to spend?
While the bill establishing legalized sports wagering created a fund to hold the tax revenue generated by it, the bill didn’t address how the revenue was to be spent or how legislators were to determine how much was available. To clarify the situation, the House Appropriations Committee is looking to use an existing process to answer the question.
House Study Bill 501 would direct the three-member Revenue Estimating Conference to set an estimate for Sports Wagering Tax collections. This would be similar to already enacted provisions requiring the REC to set an estimate for the collections of tax on casino gaming.
As the Legislature moves closer to determining how Sports Wagering tax revenue is to be used, House Study Bill 501 would provide an answer of how much could be spent.
