Increased Tax on VGTs in Illinois Overshadowed by Sports Betting Tax Drama
Illinois lawmakers quietly tucked a tax increase for video gaming terminals (VGTs) into the recently passed budget bill, HB 4951. This move, overshadowed by the more widely reported sports betting tax hike in the same bill, will see the state tax on VGTs rise from 34% to 35%, effective immediately.
Video gaming terminals in a dimly-lit room. (Source: Lucky Lincoln Gaming)
LISTEN TO THIS ARTICLE:While seemingly small, the one percentage point increase is expected to generate significant additional revenue for the state. Estimates suggest the change will bring in an extra $50 million in annual state tax dollars.
Related: Gov Pritzker Defends Sports Betting Tax Rise in Illinois as FairThis windfall comes courtesy of the sheer number of VGTs operating across Illinois. According to the Illinois Gaming Board, as of April 2024, there were nearly 47,600 VGTs scattered throughout the state, primarily located in bars, restaurants, and truck stops.
The additional tax revenue won't solely benefit state coffers. Local governments can also expect a boost. Under the current revenue sharing agreement, 83% of VGT Net Terminal Income (NTI) tax goes to the state, with the remaining 17% directed to local municipalities where the VGTs are situated. This means the $50 million increase in state tax revenue translates to roughly $10 million in additional local tax dollars.
However, the impact of the tax hike won't be felt equally across the state. Notably absent from the VGT landscape is Chicago, where a longstanding city ordinance prohibits the machines. This means the additional revenue will be concentrated in suburban areas and downstate communities that have embraced VGTs as a source of local income.
More Finance News
Illinois Squeezes the Gaming Industry
The tax increase on VGTs comes amidst a broader effort by the state to generate additional revenue from the gaming industry. Earlier this month, HB 4951 also saw a significant increase in sports betting tax rates for operators.
The new tiered system imposes a sliding tax scale based on an operator's adjusted gross revenue (AGR), ranging from 20% to 40%. This move is expected to generate substantial new revenue for the state, but it has also raised concerns within the sports betting industry about its potential impact on the market's growth.
The VGT tax increase has received less fanfare compared to the sports betting tax hike. However, the additional revenue it generates will be a welcome boost for the state budget. With Illinois facing ongoing financial challenges, the extra $50 million could be used to fund various initiatives or help bridge budget gaps.
It remains to be seen how the tax increase will affect the VGT industry itself. In addition, whether operators will choose to absorb the cost or pass it on to players through reduced payouts is yet to be determined.
RELATED TOPICS: Finance
Latest News
Most Read
Must Read
Interviews
When Helping Others Is a Life-Long Mission - An Interview with Gordon Moody CEO, Monica Shafaq
Dec 17, 2024
Interviews
Review this New Post
Leave a Comment
User Comments
Comments for Increased Tax on VGTs in Illinois Overshadowed by Sports Betting Tax Drama