A New Jersey appeals court upheld tax breaks for the state’s casino industry on Monday. The tax cuts were enacted in the midst of the COVID pandemic in 2021 to help the industry offset heavy losses sustained with no customers visiting the properties.

A three-judge panel ruled that the courts must defer to the state legislature on the issue. The judges noted that a lower court didn’t use a high standard for challenging the tax-reduction plan.

The tax breaks reduced casinos’ payments to the state in lieu of property tax obligations for 2022-2026. The three judges ruled that courts must stay out of these legislative matters unless the law violates the state constitution, a heavy burden of proof not met by the lower court, the state’s Appellate Division said.

Tax Increase Proposed For Online Gaming

The news comes as legislators have looked at raising the state’s online gaming tax in recent months. Online Casino gaming is currently taxed at 15% of gross gaming revenue and online sports betting at 13%.

In April, Sen. John McKeon (D) filed a bill that would raise those rates to 30%. That would make the rate one of the highest in the country. Few states have rates that high. New York taxes at 51% and Pennsylvania at 36%. Delaware, New Hampshire, and Rhode Island also run online gaming and sports betting monopolies through state lotteries and also have a tax rate of around 50%.

The bill’s introduction comes at a time when the state has seen record online gaming revenue edge closer to matching revenue from live casinos. Some in the state are concerned with falling casino revenue in Atlantic City.

The New Jersey Division of Gaming Enforcement reported revenue of $230.6 million in September for the state’s nine casinos, a decrease of 6.5% compared to $246.5 million for September 2023. By comparison, online gaming produced $208.1 million, up 27.1% from $163.8 million last September. Legislators may see increased iGaming taxes as a way to offset lower tax revenue derived from the state’s casino industry.