Starting July 1st, sportsbook operators in the state of Ohio will have to pay double the amount of taxes they once were, according to the state’s new biennial budget approved by Gov. Mike Dewine. Instead of a 10% tax rate on all sportsbook revenue, operators such as DraftKings, BetMGM, and Caesars will now have to pay a 20% rate.
While this change undoubtedly signals slimmer margins for these operators, it also means a significant influx of cash for K-12 institutions across the state — an influx that could end up being upwards of $350 million over the next 5 years.
Ohio Sports Betting Tax Revenue Breakdown
Current estimates from Play Ohio Media suggest that Ohio sports betting will generate somewhere between 9 and 12 billion dollars a year in total betting handle. Assuming this projected average settles around $10 billion, this means $50 billion in total wagers over the next 5 years.
The current average hold percentage in the U.S. — i.e., the amount of total handle that sportsbooks retain in revenue — is roughly 7.25%. Using these two metrics, Ohio sportsbooks are projected to see $3.625 billion in total taxable revenue over the next 5 years.
Ohio Education Fund to See 98% of Tax Money
Applying the 20% tax rate, the $3.625 billion in Ohio sports betting revenue turns into $725 million for the state government.
Of this $725 million, 98 percent — or $718 million — becomes funds for K-12 education and athletics programs across the state of Ohio. Had the state not increased the tax rate from 10% to 20%, this figure would be $359 million.
Half of the $718 million annual allotment will go to fund education programs, while the other half will go to fund interscholastic sports and extracurricular activities. The immediate focus for the extra funds will be schools that currently have lower budgets when it comes to such activities. That said, both public and nonpublic K-12 institutions across the state will see a slice of the pie. All money will be processed via the General Assembly of Appropriations.
Extrapolating this figure out over the next 20 years, K-12 education could see an additional $1.435 billion that it wouldn’t have otherwise seen. Currently, Ohio spends $11.65 billion annually on all education-related expenditures.
North Carolina Sports Betting to Follow Suite
North Carolina — the most recent U.S. state to legalize sports betting — is following a tax plan similar to that of Ohio. All operators in the Tar Heel state will have to pay an 18 percent tax rate with a majority of that designated to go towards education. Instead of using this money to fund K-12 programs, however, North Carolina is using this money to provide more funding for the state’s public universities.
The state is currently planning to allocate a minimum of $300,000 to 13 of the state’s public universities. On top of this 20 percent of the remaining revenue from sports betting taxation will go to these institutions. This money is designed to be used for travel expenditures accrued by university athletic departments.
While the discourse around sports betting largely remains centered around its negative effects, one undeniably positive effect is the wiggle room it gives state budgets when it comes to allocating funds for programs such as education.
In the case of Ohio, the 2 percent of tax revenue that is not going towards funding K-12 institutions is going towards programs that combat gambling addiction.