Michigan Governor Gretchen Whitmer is considering adopting a gambling tax similar to that of Illinois. The proposal envisions a direct tax on bets and alters other aspects of online gambling taxation.
Whitmer’s budget proposal for the state’s fiscal year 2027 was recently released. The text includes a tax per bet for sports betting operators in Michigan.
How would the betting tax work in Michigan?
According to budget documents, the fee would follow the same format applied in Illinois last year. The state would charge 25 cents on the first 20 million bets a licensee makes in a year.
After that limit, the tax would increase to 50 cents for each additional bet. Whitmer’s budget projections indicate revenue of $38.8 million in the fiscal year, earmarked for the state’s Medicaid Benefits Trust Fund.
Next, the budget information documents present a comparison with the current situation in Michigan. The excerpts highlight the state’s position among jurisdictions that have legalized the activity.
The budget briefing documents state: “The same tax was implemented in Illinois last year. Michigan’s sports betting tax rate currently ranks 28th out of the 30 states that have legalized the activity. Michigan’s tax rate remains the lowest among neighboring states.
What happened in Illinois after a similar tax?
The proposal is likely to increase state revenue, but it could directly affect gamblers. In Illinois, the tax on bets has led operators to adopt measures to offset additional costs.
Among the measures were transaction fees and higher minimum bet requirements. Furthermore, sports betting data in Illinois indicates a decrease in the number of bets placed after the new tax came into effect.
One of the industry’s leading groups, the Sports Betting Alliance, attributed the drop to the fee per bet. Still, the text points out that the Illinois experience has become a benchmark for the model Whitmer is considering.
Other tax changes in Whitmer’s budget.
In addition to the tax on bets, the budget proposal includes adjustments to the taxation of online gambling in Michigan. The governor intends to eliminate the deduction for free bets from the taxable income of operators, with an estimated additional revenue of US$21.1 million.
The documents state: “Free play is an incentive for bettors, allowing them to start placing sports bets without any initial cost. According to the budget proposal, sports betting providers would no longer be able to deduct these bets.”
At the same time, the budget includes a new “higher marginal tax rate” for online casinos. For operators with more than $185 million in adjusted gross revenue, the rate would increase by eight percentage points on the portion above that threshold, reaching 36%.
According to the documentation: “Last year, only three online casinos in Michigan met the threshold for the application of the highest tax rate. This is projected to generate $135.5 million in new tax revenue in fiscal year 2027, with the majority going directly to the Medicaid Benefits Trust Fund to support health and wellness programs.”
Finally, the text points out that the gambling industry is likely to resist the increases proposed by Whitmer. Furthermore, the measures still need to advance through the legislative process and may not be included in the final budget.
