The co-chairs of the Congressional Gaming Caucus introduced bipartisan legislation Friday that would repeal a 0.25% federal excise tax – often referred to as the “handle tax” – that is placed on most legal sports bets,

Representatives Dina Titus, D-Nevada, and Guy Reschenthaler, R-Pennsylvania, said the tax hurts the nation’s expanding legal sports betting industry and gives an edge to the illegal and offshore sports betting operators, which the gaming industry is trying to eliminate.

The taxes accounted for less than $33 million in federal tax dollars in 2019. Nevada gaming operators paid roughly $13.3 million in handle taxes that year, the most of any state. Pennsylvania sportsbooks – the state launched sports betting in May 2019 – paid $3.73 million in handle taxes that same year.

Since the Supreme Court threw out the Professional and Amateur Sports Protection Act in May 2018, 18 states and Washington D.C. now have legal and regulated sports betting operations. Four more states could launch the activity this year.

Gaming businesses that pay the excise tax must also pay an annual $50 per-employee tax on those who work in sportsbooks. The tax exempts certain types of sports betting, including horse racing and sports betting operated by state lotteries.

Titus has been opposed to the handle tax going back to 2014 when she asked the federal government to explain what happened to the funds collected from the tax.

“The IRS couldn’t answer how the money was being used,” Titus said.

Titus and Reschenthaler said Friday seemed like the perfect time to announce the legislation, with major sports leagues returning to action after being shut down since mid-March due to the coronavirus pandemic. At the same time, casinos nationwide closed for up to three months in an effort to slow the spread of COVID-19.

"Sports are back. Unfortunately, the penalty on making legal sports bets never left,” Titus said in a statement. “The handle tax makes it more difficult for legal gaming establishments to compete with illegal operators. Repealing it will push more consumers out of the black market and into a well-regulated market.”

Titus said forcing sportsbooks to pay a per-employee tax “is the last thing we need when gaming establishments are still making announcements about new rounds of layoffs and furloughs.”

Reschenthaler called the excise tax “outdated and burdensome” for gaming operators, especially in Pennsylvania, which is relatively new to the regulated sports betting business.

“Gaming is a vital economic driver in Pennsylvania, supporting over 33,000 jobs,” Reschenthaler said. “This bill will help pave the way for economic growth and job creation in my district and throughout the nation.”

Legal sports betting has quickly grown into big business in the U.S.

Since the Supreme Court ruling, Americans have legally wagered more than $22 billion on sports nationally, including $13 billion in 2019.

Before COVID-19, 2020 was set to become another record-breaking sports wagering year. The American Gaming Association said $3.5 billion had been legally bet in January and February on sports, up from $1.9 billion for the same two months of 2019. In addition to professional sports, collegiate sports were also sidelined. Coronavirus caused the NCAA to cancel the “March Madness” basketball championship.

AGA CEO Bill Miller told the Senate Judiciary Committee on Wednesday that Congress should repeal the tax, saying it puts legal sportsbooks at a competitive disadvantage.

In a statement Friday, Miller said he as grateful to Titus and Reschenthaler for introducing the legislation.

“The federal excise and head taxes levied on legal U.S. sportsbooks generate little meaningful revenue for the government,” Miller said. “Instead, they place legitimate businesses at a significant competitive disadvantage against illicit gambling operations which skirt taxes and licensing fees. Though originally enacted in the 1950s as a tool to curb illegal gambling, these antiquated federal taxes now give illegal operators a leg up.”

Miller reiterated the message that the tax places an unnecessary burden on sportsbook operators.

“Legal sportsbooks are forced to offer worse odds and payouts or reduce investment in promoting legal betting channels to the public,” Miller said. “Furthermore, the head tax serves as an impediment to hiring at a time when providing jobs is critical.”