The Louisiana State Legislature adjourned before final passage of a proposed tax on fantasy sports players.
Louisianans in 47 of the state’s 64 parishes voted on November 6, 2018 to allow residents of those political subdivisions to participate in online fantasy sports. Participants in these competitions create online teams of players from major sports, pay an entry fee, and compete to win monetary prizes based on how the athletes perform in actual games, how many people play, and how much money is bet.
The Louisiana House of Representatives in the just-ended legislative session passed a bill proposed by Rep. Kirk Talbot (R-River Ridge) to tax online fantasy sports leagues at 15 percent. The Senate then passed the legislation with amendments, but those were rejected by the House. Legislators did not reconcile the two versions before the legislative session ended June 6.
‘Unstable Tax Base’
Taxing fantasy sports is a misguided policy, says Adam Michel, a senior policy analyst at the Institute for Economic Freedom at The Heritage Foundation.
“New excise taxes are the antithesis of good policymaking,” Michel said. “They are an unstable tax base. High taxes on one good or activity tend to produce revenue in the early years, and then as people switch to other alternatives the revenue declines quickly.”
The bill would have raised an estimated $2 million over five years.
The legislation would have allocated two-thirds of the receipts from the tax to early childhood education and one-third to local governments. Pledging taxes will go toward particular programs is misleading, says Michel.
“Earmarking revenue to specific uses is bad budget policy,” Michel said. “Because tax revenue is fungible, the state will claim the new tax is funding early childhood education, but behind the scenes they can simply [use] the net tax increase to pay for other priorities.”
Assigning revenue to a particular program doesn’t mean total spending on that program will increase, says Michel.
“When you look at data from states across the country, the majority of earmarks don’t increase spending in their target category, Michel said. “They instead increase spending in other expenditure categories.”
Danger to Tourism Dollars
The proposed tax would undermine Louisiana’s appeal to tourists, says Michelle Minton, a senior fellow at the Competitive Enterprise Institute.
“Louisiana is setting itself up to lose a lot of tourism dollars to … Mississippi, which has both [Daily Fantasy Sports] and real sports betting [and] taxes the activity at just 12 percent,” Minton said.
“With Biloxi a mere hour’s drive from New Orleans, and [Mississippi] considering mobile sports betting, it is likely that money that might have otherwise been spent on tourism activities in Louisiana will instead go to Mississippi,” Minton said.
The next regular session of the Louisiana legislature is in January 2020.
“The good news is that state lawmakers have the flexibility to … find the right mix of regulation and taxes that provide residents and the economy with the greatest benefits,” Minton said.
Jake Grant ([email protected]) writes from Alexandria, Virginia.
Rep. Kirk Talbot (R-River Ridge): http://house.louisiana.gov/h_reps/members.aspx?ID=78