Where does the tax revenue go?

On Wednesday, November 23, Maryland will officially launch online sports betting, becoming the 22nd state (along with Washington, DC) where sports fans can legally bet online and on mobile devices.

While sports fans across the state are rejoicing, some may be wondering where Maryland’s tax revenue from mobile sports betting will go.

Here’s what you need to know about legal online sports betting in Maryland, taxes and how the state government uses the proceeds.

The vast majority of fees and taxes generated from sports betting revenue in Maryland, including all taxes on actual betting revenue, go into the Maryland Department of Education’s blueprint for the Maryland’s Future Fund. According to the official website, the Blueprint for Maryland’s Future:

“The Blueprint is a landmark law passed in 2021 that includes sweeping changes to Maryland’s early childhood and public schools. By increasing education funding by $3.8 billion per year over the next 10 years, the Blueprint will enrich student experiences, accelerate student outcomes, and improve the overall quality of education in Maryland.

“Bringing opportunity and a brighter future to every child in Maryland, the Blueprint for Maryland’s Future will transform the state’s education and early childhood systems with sweeping policy changes and an unprecedented investment of state and local resources.

“Putting equity at the forefront, the Blueprint mandates new programs and innovative approaches to catalyze a world-renowned education system that aims to close performance gaps and ensure opportunities for every student, regardless of family income, race, ethnicity, and/or Capability.”

In addition, according to official Maryland law, “the governor is required to include in the fiscal year 2023 budget appropriations of $1.5 million each for Bowie State University and Morgan State University to establish centers for set up the study of data analysis and sports games.”

Additionally, “The bill creates the SMWOBSWA fund to provide grants or loans to minority and women-owned small businesses to facilitate participation in the sports betting industry. The fund receives 5% of the fees charged for each class A-1 and A-2 sports betting license.” This means the SMWOBSWA (Small, Minority-Owned, and Women-Owned Business Sports Wagering Assistance) The fund does not receive any additional tax revenue from day-to-day operations, but from the granting of each license to a sports betting company in Maryland.

Eventually, the State Lottery and Gaming Control Agency will collect $4.9 million from the same sports betting royalties. That revenue is earmarked for fiscal 2022, but the bill clarifies:

“While it is anticipated that revenue from license application fees distributed to the State Lottery and Gaming Control Agency (SLGCA) as shown above will be fully realized in fiscal 2022, the estimated $4.9 million is expected to be -Dollars accounted for a portion of SLGCA costs under the bill for the entire five-year period and paid accordingly. A portion of the licensee’s share of reported revenue is used to reimburse SLGCA for costs related to background investigations; this amount is not repeated under government revenue.”

Estimates vary widely as to how much taxable revenue online sports betting will generate in Maryland. The state is officially forecasting annual sales of just under $20 million, while other unofficial estimates are projecting revenue possibly closer to $100 million.

Separately, we know the Maryland sports betting tax rate, which is 15%, the same as Louisiana, Illinois and Virginia, and is similar to the 13% and 13.75% tax rates for online sports betting in New Jersey and Connecticut, respectively.

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