Michigan lawmakers will consider gambling tax hikes this session that could net the state nearly $200 million annually, including what would be just the second per-bet fee enacted in the United States.
Governor Gretchen Whitmer released her proposed budget Wednesday, including $800 million in new taxes. According to a release, the gambling tax hikes would help stabilise Medicaid funding.
The budget proposal includes a per-wager fee for sports betting like the one lawmakers in Illinois passed last year. Sportsbooks would pay 25 cents for each bet on their first 20 million wagers per year, and 50 cents for every bet thereafter. The proposal estimates that it could generate up to $39 million annually.
Will Michigan follow Illinois with per-bet tax?
Last year, Illinois lawmakers passed the same per-bet fee structure Whitmer is proposing, the first such arrangement in the US. That came after state legislators switched from a 15% flat tax on sports betting revenue to a tiered tax system ranging from 20% to 40% based on operator revenue.
In response to the per-bet fees, sportsbook operators in Illinois instituted a variety of ways to offset the fees, including transaction fees for bettors.
Illinois bettors placed fewer wagers after the fee implementation. The fees resulted in 15% fewer wagers year-over-year since they went into effect, according to Illinois Gaming Board reports.
Rep Daniel Didech, chair of the House Gaming Committee, introduced a bill this month, HB 5143, proposing to end the per-bet fee. Another Illinois lawmaker warned other legislators about raising taxes at December’s National Council of Legislators from Gaming States meeting in Puerto Rico.
“Lawmakers need to understand, what you think you’re going to get from raising taxes, you’re not going to get,” Rep Jehan Gordon-Booth said. “We want this industry to continue to strike the right balance. This will be a problem in budgets for the foreseeable few years. I don’t want to see us continue to deteriorate the industry.”
Gordon-Booth was not the only official to warn lawmakers at the conference. Louisiana Gaming Control Board Chairman Christopher Hebert said raising taxes too high could cause operators to leave markets. Louisiana was among several states that increased their tax burdens on operators last year.
Michigan sports bet fee faces uphill battle
Among other Michigan taxes would be an 8% increase on online casino revenue above $185 million. Operators would pay the existing 28% tax up to $185 million in revenue, then 36% thereafter. The proposal estimates the increase could generate up to $136 million in new state revenue.
Whitmer also proposed an end to promo deductions, estimated to generate an additional $21 million from sportsbooks. Whitmer, a Democrat, was immediately met with Republican pushback. Republicans in Michigan control the House.
“We’re not going to do any of that,” House Speaker Matt Hall said at a press conference. “There will be no tax increases in this budget when we do this deal.”
Last month, Arizona Governor Katie Hobbs introduced a significant sports betting tax increase proposal in her budget. Meanwhile, West Virginia lawmakers have introduced a bill to raise sports betting taxes from 10% to 25%.
Multiple industry sources told iGB heading into the session to expect tax increase legislation impacting the gaming industry as states look to fill funding gaps resulting from cutbacks in federal support.
Pat Evans
Pat covers the legislation and regulation of online gambling in North and South America, having covered the US sports betting industry extensively since 2019.
Original article: https://igamingbusiness.com/finance/tax/michigan-sports-betting-per-bet-fee-proposal/
