With Senate Bill 3, the Missouri General Assembly failed to consider how it will replace $764 million in its state budget.
Legal Missouri sports betting, while by no means the only way to fill that hole, may be a necessary means for balancing that budget in years to come.
Sports betting offers an obvious solution to state expenses
The Missouri state legislature has seemingly gotten too comfortable with one-time federal dollars lately. In doing so, it failed to consider how the largest income tax cut in state history might become detrimental to the state budget.
During the most recent special session in Jefferson City, the top income tax rate was reduced from 5.3% to 4.95%. Pending additional steps, that rate would decrease to 4.5% if revenue continues to meet targets. Sure, that could very well happen, but with a potential recession on the horizon and reduced federal spending, it could still be a long way out.
Gov. Mike Parson said in a recent public statement:
“We are thrilled that the General Assembly has answered our call to cut Missourians’ taxes and return some of their hard-earned dollars. We called this special session to pass and extend critical support to our agriculture industry and reduce Missourians’ income tax burden, and that’s exactly what we are accomplishing.”
The state government may soon find itself in trouble if it doesn’t enact creative ways to generate $764 million in revenue. But sports betting, if taxed appropriately and implemented effectively, is a glaringly obvious solution that could provide budget relief. This is especially in areas of education and veterans’ programs.
For example, the first retail sports book in Illinois opened in March 2020. The state has since grossed nearly $175 million in tax revenue, which undoubtedly would’ve been much higher if the COVID-19 pandemic hadn’t done its damage to the sporting world. And, that was with a 15% tax rate!
A drop in the Missouri bucket
Yes, in my latest story we discussed the case for compromise in Missouri. If Sen. Denny Hoskins gets his way, the Missouri tax rate for sports betting would be 21%, which could bring in $163 million in tax revenue for the state.
Like I said before, it’s certainly not the only solution — as $163 million is only a chunk of $764 million — but in order to fill a hole the state legislature backed themselves into with Senate Bill 3, measures such as legalizing sports betting may be necessary.
Now, if the sports betting world in Missouri were to hinge their hopes on Rep. Dan Houx, we might be bringing in considerably less in tax revenue – somewhere in the $9-10 million range. But, $9-10 million is $9-10 million, and it’s a combination of things, no matter how small, that will be able to overcome a likely budget deficit in years to come.
However, I think it’s important to keep in mind that these are first-year estimates. And as long as more and more people continue placing wagers, that number is bound to increase. Just look at Iowa, a state with a 6.75% tax rate on sports betting. From 2020 to 2021, Iowa’s sports wagering increased nearly fourfold. And with it, so rose their tax revenues.