In 2024, early estimates suggest that VT sports betting will yield between $7 and $10 million annually, with potential for future growth. Although Vermont’s betting revenue is promising, it pales in comparison to markets like New Jersey and New York, where total betting handle exceeds $50 billion and tax revenues surpass $500 million.
New Jersey, for instance, has accumulated $586.7 million in taxes from over $4.2 billion in revenue, thanks to a well-established betting industry with an array of in-person and online options.
States like New York also lead in tax revenue, with $2.3 billion collected due to a 51% tax rate on betting revenue, one of the highest in the U.S. In comparison, Vermont’s tax system is more modest, collecting a smaller amount from its relatively new and limited betting activities.
Comparison with Nearby States: A Regional Perspective
Tax policies across the Northeast reflect each state’s distinct approach to generating revenue from sports betting. States like New York, New Hampshire, and Rhode Island impose a substantial 51% tax on revenue, far exceeding the national average.
This approach maximizes tax income but can deter new entrants due to high operational costs, especially when combined with licensing fees. For example, Massachusetts requires a $5 million licensing fee, with a similar renewal fee every five years, creating a considerable barrier for smaller operators.
Vermont’s policies, though more relaxed, still aim to generate steady revenue while fostering a sustainable market. As Vermont Public senior political correspondent Bob Kinzel noted, Vermont’s tax rates and modest initial earnings mean that sports betting is unlikely to substantially impact major funding needs, like the state’s $2.3 billion education budget.
Kinzel mentioned,
“Initial estimates are between $7 and $10 million a year, and this could certainly grow in the coming years.”
However, this revenue currently goes into the general fund, with allocations across various public needs rather than solely to education or property tax relief.
Balancing Tax Rates to Support Industry Growth
The Tax Foundation’s recent report underscores the need for balanced tax policies, especially for smaller states like Vermont that aim to grow their legal sports betting industries. States with lower tax rates, like Nevada and Iowa at 6.75%, find this approach encourages market growth by keeping overheads manageable for operators.
Vermont’s policy aligns more closely with these states, focusing on modest taxes to gradually build its betting market rather than imposing prohibitively high fees that might stifle growth.
In the context of this growth-focused model, Vermont’s tax income from sports betting may remain limited. As noted by the Tax Foundation,
“lower rates are more favorable to legitimize the industry even more and keep it growing.”
By maintaining moderate tax rates, Vermont may gradually attract more VT online sportsbooks to its legal betting market, diverting them from illegal options and strengthening regulatory oversight.
Vermont’s reliance on sports betting revenue as a supplementary income source reflects its strategic approach to funding. While current revenues from sports betting and other “vice taxes” like cannabis are not sufficient to replace larger sources like property taxes or income taxes, they provide Vermont with incremental funding that can support various programs.
And as Kinzel’s analysis reveals, the potential for revenue growth exists, especially if Vermont can sustain and expand its market participation rates over time.
