Chicago Mayor Brandon Johnson, in his proposed $16.6 billion budget for 2026, plans to impose a 10.25% local tax on sports betting revenue, expected to generate about $26 million annually to help offset a $1.15 billion budget deficit. The proposal is set to take effect on January 1, 2026, and will be an additional levy on top of existing taxes in Illinois. This move follows the recommendations of the Chicago Financial Futures Task Force, aimed at increasing revenue through a "fairness-based balanced approach" without raising property taxes or relying on regressive measures. Illinois has repeatedly increased sports betting taxes in recent years, changing the tax rate to a tiered system of 20-40% in 2024 and introducing a per-bet surcharge, with similar tax increases occurring in several other states across the nation.
Core Content of the Tax Proposal
Chicago Mayor Brandon Johnson suggests in the 2026 budget proposal to levy a 10.25% local tax on sports betting revenue. This tax is expected to bring in $26 million annually for Chicago on top of the existing tax rates in Illinois.
The proposal is part of a $16.6 billion budget plan aimed at helping to cover a $1.15 billion budget deficit and is scheduled to officially take effect on January 1, 2026.
Budget Background and Deficit Solutions
Mayor Johnson states that the budget plan will cover the funding gap "without the need to increase city property tax collections or rely on regressive revenue measures." He proposes a "fairness-based balanced approach" to obtain progressive revenue from the most capable contributors.
The plan also includes government modernization and efficiency measures to achieve savings, with the sports betting tax being one of the key sources of revenue.
Basis and Expected Effects of the Proposal
This proposal is not entirely unexpected, as earlier this year, the Chicago Financial Futures Task Force had suggested imposing a per-bet surcharge on local betting. The expected revenue of $26 million will be used directly to alleviate budget pressures.
The Mayor's office believes that sports betting operators have the capacity to bear the additional tax burden without causing undue strain on the industry.
Changes in Illinois Tax Policy
In recent years, Illinois has been at the forefront of increasing sports betting taxes. In 2024, Governor JB Pritzker changed the tax structure, eliminating the 15% baseline tax and introducing a tiered tax rate of 20% to 40% linked to revenue.
This reform has added more than $260 million in taxes for the state government, indicating that the sports betting industry has become a significant source of revenue.
Per-Bet Surcharge and Operator Responses
This year's budget in Illinois also introduced a per-bet surcharge, with operators paying 25 cents per bet for the first 20 million bets and 50 cents thereafter. In 2024, the state's betting volume reached 370 million, with DraftKings and FanDuel each exceeding 150 million bets.
To mitigate the impact, operators have adopted measures such as implementing service fees and raising minimum bet amounts.
National Trend of Increasing Sports Betting Taxes
Illinois is not the only state to raise sports betting taxes. Maryland raised its tax rate from 15% to 20% this year, Ohio increased its rate from 10% to 20% in 2023, and New Jersey proposed an increase from 13% to 19.75%.
Louisiana also raised its tax rate from 15% to 21.5%, showing a nationwide trend of increasing sports betting taxes.
Specific Operator Response Measures
Five sports betting companies, including DraftKings and FanDuel, have implemented a per-bet service fee. Bet365, Caesars, and Fanatics have adopted similar measures in Illinois. BetRivers and ESPN Bet have set the minimum bet amount at $1.
Hard Rock Bet and BetMGM have set their minimum bet amounts at $2 and $2.5 respectively, while Circa has set it at $10, showing that the industry is adjusting its business model to cope with increased taxes.
Policy Goals and Fairness Concept
Mayor Johnson emphasizes that the proposal is based on the concept of "fairness," requiring the most capable contributors to take on more responsibility. This approach avoids increasing the tax burden on ordinary citizens, especially avoiding regressive tax measures.
The policy goal is to obtain necessary fiscal revenue from specific industries without affecting the majority of residents.
Industry Impact and Market Reaction
The additional tax may impact the profitability of sports betting operators, especially since Illinois has already implemented tiered tax rates and a per-bet surcharge. The industry may need to further adjust its business model and pricing strategies.
The market reaction will depend on the final implementation of the tax and the specific measures taken by operators.
Implementation Timeline and Subsequent Processes
The proposal is planned to take effect on January 1, 2026, and will need to go through city council deliberation and approval processes before then. The Chicago city government will consult with businesses to assess the tax's impact on the industry and the economy.
The final plan may be adjusted based on feedback to balance fiscal revenue with healthy industry development.
