New Jersey Governor Proposes Tax Hike on Gambling Revenue

New Jersey Governor Phil Murphy's budget proposal for Fiscal Year 2026 has sparked a fresh debate over the taxation of online gambling, signaling a potential shift that could significantly impact both the state's economy and its gaming industry. The proposal suggests a hike in the tax rate on revenue from licensed online casinos, from the current 15% to 25%. This would also apply to online sportsbooks, aligning the tax rate for both verticals. If the plan passes, it would mark the end of New Jersey's current tax structure for online gambling, setting a new precedent for the state’s legal gaming landscape.

The Need for Revenue

As with any state budget, the formulation of Governor Murphy's proposal stems from the financial realities facing New Jersey. The state's growing need for additional revenue has prompted the governor to suggest raising taxes on one of its most lucrative sectors: online gambling. According to the proposal, a 25% tax on both online casino revenue and sports betting would generate an estimated $400 million in additional funds for New Jersey’s general and casino revenue funds.

While such tax hikes are not new in the context of U.S. online gambling, Murphy’s proposal comes after similar efforts by lawmakers in New Jersey. However, this latest plan proposes a more moderate increase compared to previous legislative pushes, though it still reflects the mounting financial pressures facing the state.

Murphy’s suggestion follows a growing trend among U.S. states looking to capitalize on the expanding legal online gambling market. In the past year, both Illinois and Ohio raised their tax rates on online sports betting, while Maryland Governor Wes Moore proposed doubling the tax rate for online sportsbooks in his state. In all these cases, the rationale for the hikes mirrors the logic presented in Murphy’s budget: an increasing need for state revenue to meet various financial obligations.

While these increases have faced resistance from gaming operators—who argue that higher taxes could stifle industry growth—the states themselves have largely viewed these moves as necessary to fill budgetary gaps. Should New Jersey adopt the 25% tax rate, it would join this broader movement to increase revenue from online gambling, making it the latest example of a state adjusting its fiscal policies in response to financial strain.

Legislative Backdrop and Senate Opposition

This proposal is not the first of its kind in New Jersey. In April 2024, State Senator John McKeon introduced a bill seeking a more aggressive approach: a tax rate of 30% on online gaming revenues. However, McKeon’s bill was not included in the final FY2025 budget, despite the senator’s comments at the time about the inevitability of a tax increase in light of the state's financial needs.

Despite the apparent inevitability of a tax hike, not all members of the New Jersey legislature are fully on board with Murphy’s proposal. Two prominent senators have expressed concerns that increasing the tax rate could have long-term detrimental effects on the growth of online gaming in the state. Their worries center around the potential for reduced operator profits, which could stifle investment and lead to slower revenue growth for both the industry and the state.

This ongoing debate highlights the balancing act that lawmakers face—ensuring that New Jersey’s gambling industry remains competitive while also addressing the state’s financial needs. As the legislature continues to deliberate, the outcome of this debate could set a major precedent for future gambling tax policies across the nation.

The Financial Stakes and Long-Term Impact

For New Jersey, the decision to raise the tax rate could have significant long-term implications. The state has long been a leader in the online gambling space, with its casinos and sportsbooks providing a steady stream of revenue. However, increasing the tax rate too aggressively could risk alienating operators and potentially prompting them to scale back their operations, limit their offerings, or even relocate to states with more favorable tax structures.

On the other hand, the potential for an additional $400 million in state revenue could be a game-changer for New Jersey’s budget, funding everything from infrastructure projects to public services. As the state navigates these competing interests, the eventual decision on the tax rate could shape the future of online gambling in New Jersey for years to come.

 

Raising the tax rate on online gaming is a necessary step to address the state’s growing financial needs while ensuring that New Jersey continues to lead in the expanding digital gambling market.

Conclusion

Governor Murphy’s proposal to raise the tax rate on online casinos and sportsbooks is the latest move in a broader trend of tax increases targeting the booming online gambling sector in the U.S. While such hikes have sparked pushback from industry players, they also reflect the fiscal pressures many states are facing. As New Jersey lawmakers weigh the benefits of increased revenue against the potential costs to the industry, the outcome of this debate will likely serve as a bellwether for other states considering similar measures.

The future of online gambling in New Jersey may hinge on the fine line between generating necessary revenue and maintaining a competitive and thriving industry—one that continues to be a vital economic engine for the state. With the proposal set to be debated in the coming months, all eyes will be on Trenton as legislators work to balance the needs of the state with the future of online gaming.