Chicago’s Proposed Online Sports Betting Tax
There’s a right way and a wrong way to do things, and when you do things the wrong way, they can get messy and costly in a hurry. That’s one of the reasons that Chicago budget leaders should abandon the misguided and half-baked idea of taxing people in Chicago who go online to bet on sports.
Recent Increases in Illinois Sports Betting Taxes
Twice in the past two years, Illinois has raised taxes on sports betting. Starting a few months ago, the state imposed on all Illinois sports bettors a per-bet tax of 25 cents or 50 cents. So now, if you go online to place a bet for $1, your bet will actually cost at least $1.25, with the additional quarter going to the state. Not surprisingly, Illinois has seen a decline in the number of people making sports bets. City budgets need solutions that are predictable and dependable, and a new tax on sports bets isn’t one of them. Under these tight circumstances, an additional sports bet tax by Chicago will simply drive more bettors away from legal betting sites.
Legal Vulnerabilities of a City-Level Betting Tax
The proposed Chicago sports betting tax also is problematic because it can easily be challenged in court. Anyone who makes a bet in Chicago can challenge the tax, and thousands of city residents will be clamoring to file suit. When that happens, the tax could be deemed invalid. When the lawsuit happens, Chicago probably will be in the same situation as it was in 2011, when the Illinois Supreme Court threw out Chicago’s tax on people who used StubHub.
Strained Relations With State Leaders
The idea of a Chicago tax on sports betting is misguided for other far-reaching reasons, not least of which is that it could further damage the already poor relationships that City Hall has with many state leaders. As businesses and lifestyles evolve, Chicago needs additional authority from the state so that our finances keep pace with the economy. Clumsily interfering with the state’s tax system for sports betting doesn’t simply run the risk of alienating the very officials who we need for support, even as it invites other municipalities to do the same. It also actually invites state leaders to firmly preempt Chicago, not just relative to sports betting but relative to a whole host of other taxes in which coordination and uniformity are needed across the state. The proposed city sports betting tax is so disruptive that it now appears that state policymakers are considering legislation that will, dollar for dollar, reduce state funding to cities that impose sports betting taxes.
Risks to Chicago’s Finances and Betting Market
Especially in times like these, those who are struggling to figure out effective ways to address Chicago’s financial problems need more friends in Springfield — not fewer. Messing around with an emerging industry, one that already is pinched by taxes, is not the way to go about that. Ignoring legal precedent and disrupting current revenue systems is not the way to do it. Driving bettors to alternative options — out of the city and out of the legal market — is not the way to do it.
A Better Path Forward for Sustainable Revenue
The way to make allies is to start collaborating and coordinating with communities, state officials and business leaders. The way to do it is to reject facile solutions that are mirages, such as local taxes on sports betting. The way to do it is to engage in the hard work of developing and winning support for budgetary solutions that are sustainable and predictable — two requirements for a city where people can affordably live, work and play.
Ald. Gilbert Villegas represents Chicago’s 36th Ward and is chairman of the Economic, Capital and Technology Development Committee.
