Michigan proposes tax hikes for sports betting and igaming operators

U.S. Senators Sam Singh and Jeremy Moss have introduced legislation aimed at revising the tax structure for sports betting and igaming operators in Michigan. Separate bills for each vertical, introduced last week, propose modest tax increases.

The proposed measures, Senate Bills 1193 and 1194, were introduced on Thursday (Dec. 5), and have been referred to the Senate Government Operations Committee. The bills seek to amend the 2019 Lawful Sports Betting Act and the 2019 Lawful Internet Gaming Act to implement slightly higher tax rates.

According to NBC affiliate WOOD-TV reporter Byron Tollefson, American gambling companies FanDuel and DraftKings urged customers in Michigan to contact their state legislators to oppose the bills.

FanDuel and DraftKings are both emailing Michigan customers urging them to tell state lawmakers to reject new legislation that would increase taxes on sports betting and casino gaming operators.

SB 1193 and 1194 were introduced by Senators Singh and Moss last Thursday. pic.twitter.com/WxZ16Pxzgt

— Byron Tollefson (@byron_tollefson) December 9, 2024

Only seven U.S. states currently permit legal online casino games: Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, Rhode Island and West Virginia.

Currently, Michigan’s sportsbooks are taxed at 8.4% of adjusted gross sports betting revenue. Online casino operators, meanwhile, are taxed on a tiered scale based on their annual adjusted gross revenue (AGR). Those earning under $4 million pay a 20% tax rate, while those with $12 million or more face a 28% tax rate.

Sportsbooks can deduct promotional spending from their gross revenue before taxes are calculated, and online casinos can do so as well, though with certain limitations. The provision, which is particularly beneficial for sportsbooks, contributes to Michigan’s reputation as a tax-friendly market for gaming operators.

The proposed legislation seeks to increase the tax rate on online casino revenue by one percentage point, while the hike for sports betting revenue would be comparatively smaller at just one-tenth of a percentage point. The bills also propose minor adjustments to the distribution of tax revenue, which currently supports the Internet Gaming Fund, Detroit municipal services, and the agricultural fund.

Under the proposed changes to sports betting tax revenue distribution, the share allocated to the city where the operator is located would increase from 30% to 31%. The portion directed to the state fund would decrease slightly from 65% to 63.5%, while the allocation to the Michigan Agriculture Equine Industry Development Fund would rise from 5% to 5.5%.

The bills do not provide specific explanations for the modest proposed tax increases.

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