"I haven't got time to wade through the book, so exactly how does the straight tax deal with the fact that apparently it would replace the existing 0.25% federal excise tax on sports bets? This amounts to a 100 fold increase to 25%.
Pretty clear that this would kill the Nevada sports betting industry, that alone is enough for me to be totally against it."
Its hard to believe that anyone can be so dense to not see how a 25% tax on the amount of every sports wager made at fixed odds (i.e not pari-mutuel) would drastically affect the odds offered and/or radically reduce sports wagering, but I'll go through the math.
Let's say Nevada sports books continue to offer -110 odds even after the 25% tax is enacted. A bettor makes a $1100 "purchase" of a straight bet on a particular game. That triggers a $275 tax which, under "the current rules for the federal excise tax", the sportsbook agrees to pay. Let's say the book can balance its action for $1100 on the other side which triggers another $275 in tax.
With such balanced action, (ignore pushes) the book has taken $2200 in total revenue, paid $550 in taxes and will payout $2100 to the winner of the bet. This results in a net of $2200-2100-550 = -$450, a loss! Thus no book would make money with odds at offered at -110 even with balanced action.
In fact, to have the same profit of the current -110 odds, straight bets would have to be priced at around a ML of -244!
In fact, the history (pre-1974 or so) of Nevada sportsbooks includes a period when the tax was 10% and NOT A SINGLE CASINO in Vegas had a sportsbook! It just wasn't profitable. Imagine what a 25% tax would do.
Perhaps the following snipet (taken from a CNN article, note that the 2% reference in 1974 was later reduced to the current 0.25%) will cement the notion that a 25% tax on sports betting revenue is ridiculous:
... Until the mid-1970s, legalized sports betting in Nevada was confined to dimly lit, smoke-filled rooms in tiny turf clubs where the floor was the ashtray. Recalls Richard Davies, a history professor at the University of Nevada at Reno: "The aroma of stale cigar smoke, day-old spilled beer and greasy hot dogs generated an ambiance only a dedicated horse player could appreciate," which was appropriate, since most of the betting action was on horses, not sports. The casinos had no sports books.
The main reason: no money to be made. From 1951 to '74, the Federal Government levied a 10% excise tax on the amount of sports wagers. Since the profit margin before the tax was generally 5% or less, the tax made the business unprofitable. But in 1974, the Nevada congressional delegation helped persuade Congress to slash the tax from 10% to 2%. The rush was on. By 1988, wagers on all sports--professional and college--totaled $1.3 billion.
