The Louisiana Legislature passed, and Gov. Jeff Landry signed, a new law earlier this year that increases the state’s tax on online sports betting from 15% to 21.5%. A quarter of the revenue generated from Act 298 will be used to subsidize college athletic programs. The move was in response to a landmark 2021 federal ruling allowing college athletes to earn income through name, image and likeness (NIL) deals. The New York Times’ Jason Schwartz explains how costly tax cuts also played a role:
A few months earlier, in late 2024, Mr. Landry had pushed through a tax overhaul, lowering corporate and personal income taxes. His package also increased the sales tax, which “made up some but definitely not all of the lost revenue,” according to Jan Moller, the executive director of Invest in Louisiana, a left-leaning think tank. That left the state in even greater need of cash than usual. Raising the sports betting tax rate would be a chance to put into action a well-known saying from Russell Long, the longtime Louisiana senator: “Don’t tax you; don’t tax me; tax that man behind the tree.”
Louisiana’s model to use sports betting revenue to subsidize university athletic departments could be a model for other college-sports-hungry states:
Louisiana may be the start of a movement. Mr. [John] Hartwell, who left his post at U.L.M. in August, said that since the bill passed, he had heard from “probably 40 or 50” fellow sports administrators around the country, wondering how they could get a similar law passed in their state. Many states in the South and Midwest legalized sports betting with relatively low tax rates. These also happen to be the states where college sports have the strongest cultural hold.
Some have questioned using the new revenue on college sports, at a time when Louisiana faces looming budget shortfalls and contends with the negative side effects of legalized gambling:
In the new bill, Louisiana does dedicate significant money for education — almost as much as the $24.3 million projected to go to college sports. But just 3 percent of the revenue — the same as before — has been set aside for problem gambling treatment and outreach. That is projected to raise about $3 million per year. Critics see the bill as the latest sign of misplaced priorities amid the nationwide sports betting boom.
Louisiana’s online sports betting tax rate ranks 9th nationally.
Federal funding surges in Louisiana
Louisiana’s total annual budget has surged over the past decade, buoyed by a massive influx of federal funds. In 2023, more than half of the state’s revenue (50.1%) came from Washington. The Center Square’s Johnny Edwards reports on where these dollars are going:
Louisiana’s federal dependency has long been tied to disaster relief for hurricanes, floods and COVID-19. But the infusion accelerated when Edwards, on his first day in office in 2016, signed an executive order expanding Medicaid. The poorer a state, the higher the federal Medicaid contribution, and Louisiana currently has one of the nation’s highest poverty rates, topped only by Puerto Rico, according to 2023 census data.
Focusing only on the state’s total budget gives an incomplete picture:
“Most of this growth is in health care,” said Jan Moller, executive director of Invest in Louisiana. “Louisiana bought something very important with that, which is health care coverage for people who didn’t have it before.” Moller said it’s the annual state general fund that matters most to Louisianans, a figure whose growth has lagged inflation over the past decade – rising 27% from about $9.6 billion in fiscal year 2017 to the current level of $12.2 billion. “I would argue that Louisiana has been quite conservative in its budgeting in the part of the budget that it controls that is funded by taxes and fees paid by Louisiana citizens,” Moller said. “It has been keeping pace with the economy, more or less.
States must prioritize revenue in wake of federal megabill
The Trump administration is shifting some of the financial responsibility of health care, food assistance and recovering from natural disasters from the federal government to states. Wesley Tharpe of the Center on Budget and Policy Priorities explains how these moves, including the federal tax and budget megabill, will create fiscal pressures for states:
Costs from the federal bill will soon grow as states will need to invest considerable funds to set up and operate sweeping new administrative requirements for health and food programs, most notably onerous new work requirements in Medicaid. Coming next will be larger costs, including strict new limits on state “provider taxes” that help finance Medicaid and a new requirement for states to shoulder — for the first time in history — a substantial share of SNAP food benefit costs. States and localities will also increasingly face spillover costs from the megabill’s cuts to affordable health coverage in particular, which are poised to send a surge of newly uninsured people seeking costlier, uncompensated care to local emergency rooms and clinics.
The federal government’s fiscal retreat will leave state leaders with tough choices. Tharpe explains why policymakers must prioritize revenue to support their communities amid dwindling federal dollars:
Without a clear revenue-first approach, state and local policymakers will have no choice but to enact steep cuts to not only their new responsibilities for health care and food assistance but also their full constellation of public services including education, housing, and infrastructure. That would leave residents less able to afford to meet their basic needs and facing reduced quality and access for state and local services such as schools, roads, and health care.
Some revenue-generating ideas include:
- bolstering personal income taxes;
- tackling corporate tax avoidance;
- exploring new taxes on wealthy households;
- reforming property and sales taxes to more closely track ability to pay; and
- leaning in on an emerging suite of revenue-raising tools linked to helping fight climate change
Local vacancy taxes are one tool in a toolkit
Dozens of localities have enacted “vacancy taxes,” which are taxes on vacant residential or commercial properties or abandoned or blighted properties. But these policies only raise modest amounts of revenue and have no dramatic effect on improving the housing market. Rita Jefferson of the Institute on Taxation and Economic Policy breaks down vacancy taxes and explains how they can be useful if combined with other strategies:
Vacancy taxes are intended to put land and property into productive use, discouraging owners from letting properties deteriorate or holding on to properties indefinitely to speculate on future real estate prices. This makes homes and commercial properties unavailable, driving up the costs for consumers. In the limited places where these taxes have been tried, they have made slight improvements in housing availability in France and Vancouver, but have had limited or no impact on housing affordability. These taxes will not single-handedly solve problems in cities but are worth considering as a small part of a more comprehensive set of policies to address housing shortages, land use, and building thriving communities.
Number of the Day
$202.90 – Standard monthly premium for Medicare Part B in 2026, up nearly 10% from 2025. (Source: Centers for Medicare and Medicaid Services)