Governor Looks To Sports Betting Tax to Offset Federal Funding Cutbacks

Michigan Governor Gretchen Whitmer is looking to the state’s sports bettors to help recoup a $1.8 billion budget shortfall thanks to federal funding cuts.

As part of her budget proposal, Whitmer is suggesting that a new per bet tax be implemented in Michigan. It would impact both sports betting and casino gambling in the state.

This new proposal would see a 25-cent tax added on every sportsbook bet placed in the state, up to the first 20 million bets. Beyond that threshold, every wager would be taxed at 50 cents per bet.

Whitmer’s plan would also raise the tax rate on sports betting revenue from 8.4% to a whopping 36%. The new budget would eliminate the free play deduction offered to sports betting operators. This tax loophole permitted betting sites to deduct funds provided by bonus bet promotional offers given to players from their tax base. By eliminating this deduction, the government is projecting that it would generate $21.1 million in revenue for the state.

Estimates are that the combination of all these tax changes implemented upon the state’s betting industry could garner an additional $192.8 million in revenue for the Michigan government.

Republican leaders in the state government have already indicated that they will fight against these measures and other proposed tax increases made by Michigan’s Democratic governor.

The proposals would cover the fiscal year that begins on October 1.

Online betting sites are already lobbying against these proposed Michigan tax increases

The per tax bet proposal in Whitmer’s budget plan is identical to the one instituted last year by neighboring state Illinois. That plan already looks to be blowing up in the face of the Illinois government.

Betting sites responded to the tax increase by passing on the costs to bettors. This was done through setting higher minimum bets.

Data shows that the per bet tax is also impacting the bottom line in terms of revenue earned from sports betting. Illinois is showing a 25% year over year decrease in sports betting revenue since the new tax rate was instituted. There’s already a bill in front of the state legislature in Springfield calling for the per bet tax to be rescinded.

“These Whitmer tax hikes just completely ignore the realities of what’s happening in Illinois,” Joe Maloney, President of the Sports Betting Alliance (SBA), told TV station WLNS of Lansing, Michigan.

“It is 100% affecting behavior, and how do we know this? Because it’s only happening in Illinois and nowhere else in the country.”

The SBA is an advocacy organization representing five of the major sportsbooks operating in Michigan – DraftKings, BetMGM, Fanatics, Bet365, and FanDuel. They are already launching lobbying efforts to halt the Whitmer plan before it even gets off the ground.

“The average bet in an American legal regulated sportsbook in this country is somewhere between 13 and 20 dollars,” Maloney said. “Bettors are not overwhelmingly spending more than that. So when you institute these per-wager fees, 25 cents, 50 cents, it ends up being a lot.”

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