Arizona would be implementing a massive and very unique tax increase on sports betting if Governor Katie Hobbs has her way.
As part of her 2026 state budget, Hobbs is proposing that Arizona increase the tax rate on sportsbooks to as much as 45%. However, that high rate would only apply to four sportsbooks operating in Arizona’s legal and regulated sports betting realm - BetMGM, DraftKings, Fanatics, and FanDuel.
Those four sportsbooks are the top revenue earners in the state, each grossing between $75 million per month. Sportsbooks operating in Arizona that fall below this revenue barrier - including those run by the state’s tribes - would continue to be taxed at the current Arizona tax rate on sports betting, which is just 10%. That’s the fifth-lowest of any US state that offers legal and regulated sports betting.
The increase to 45% on its top earners would push Arizona to the seventh-highest tax rate in the US sports betting market.
Hobbs indicated that this sports betting tax increase could generate as much as $145.9 million for the state in a year. In 2021, the first year Arizona offered legal and regulated sports betting, sportsbooks in the state grossed $225 million in revenue. Combined, the sports betting sites paid less than $10 million in taxes that year.
“I think that we have a very reasonable and balanced budget based (on) some pretty reasonable assumptions about fees that we can levy on sports betting,” Christian Slater, a spokesperson for Hobbs,
told the Arizona Mirror.
That’s not an opinion shared by Republicans in the state. Hobbs is a Democrat, and Arizona’s Republican opposition has made it abundantly clear that they won’t support any tax increases in the state. Republicans control the Arizona state legislature.
A change in tax revenue laws requires the support of a two-thirds majority in both chambers of Arizona’s state legislature.
Hobbs says the additional taxes are required to offset a reduction of $180 million in federal funding that was cut by the Trump administration. If approved, these changes to the Arizona sports betting tax laws would go into effect with the fiscal year 2027, which would begin on July 1.
Arizona is the latest state to look at increasing taxation rates on sports betting
In making this move, Hobbs is following a developing trend in the US market that is impacting the sports betting industry.
In her 2027 budget, Michigan Governor Gretchen Whitmer proposed increasing the sports betting tax in her state from 8.4% to 36%. She also proposed an additional per-bet tax. This new proposal would see a 25-cent tax added on every sportsbook bet placed in the state, up to the first 20 million bets. Beyond that threshold, every wager would be taxed at 50 cents per bet.
Whitmer also called for the elimination of bonus bet deductions from sportsbook revenue. She projected that the combination of all these changes in the tax law could generate an additional $192.8 million in annual tax revenue for the state.
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