The Governor of Michigan, Gretchen Whitmer, has unveiled a plan to implement a tax on sports bets based on individual wagers, similar to a recently adopted structure in Illinois. This initiative is part of her budget proposal for the fiscal year 2027, aiming to generate approximately $39 million for the state’s Medicaid Benefits Trust Fund.
According to the proposed system, sportsbooks would need to pay 25 cents for each of the first 20 million bets made annually, with the fee rising to 50 cents for every bet beyond that. Documentation from the budget highlights that the current sports betting tax rate in Michigan is among the lowest in states that allow this activity, positioned at 28th out of 30 states.
“A similar tax was established in Illinois last year,” the documents indicate. “Michigan’s tax rate remains the lowest in the region.”
This precedent set by Illinois has faced backlash from both operators and some legislators due to its adverse effects on betting activity. After introducing the per-bet fee in Illinois, sportsbooks reacted by raising transaction costs and increasing minimum betting amounts.
A year-over-year decline of 15% in betting volume has been reported by the Illinois Gaming Board, with the Sports Betting Alliance attributing this decrease primarily to the new fee.
Whitmer’s proposal also suggests eliminating the allowance for free bets to be deducted from taxable revenues. This adjustment is projected to increase state revenue by $21.1 million, according to the budget report.
“Offering free bets incentivizes gamblers, allowing them to engage in sports wagering without initial costs,” the documents explain. “Under the new budget proposal, sports betting operators would be prohibited from deducting these wagers.”
Another suggested measure would adjust the tax rate for online casinos. Operators whose adjusted gross revenue exceeds $185 million would face a new rate of 36% on the revenue above that figure, up from the current rate of 28%. Last year, only three operators surpassed this revenue threshold. This higher tax rate is expected to generate $135.5 million in the fiscal year 2027, with most funds allocated for Medicaid and associated health programs.
Collectively, the proposed alterations to gambling-related taxes could yield nearly $200 million in annual revenue. The budget revealed on Wednesday includes $800 million in new taxes, which Whitmer promotes as essential for supporting Medicaid funding.
However, there has been considerable opposition to these proposals. House Speaker Matt Hall stated in a press conference, “We will not proceed with any of these plans. There will be no tax hikes in this budget if we reach an agreement.” Republicans currently possess control over the Michigan House.
This month, House Gaming Committee Chair Daniel Didech has introduced legislation to revoke the per-bet fee. Representative Jehan Gordon-Booth cautioned at a national gaming conference that hastily increasing taxes could have negative repercussions.
“Legislators need to realize that the anticipated revenue from higher taxes may not materialize,” she stated. “We aim for this industry to maintain a balanced trajectory. If we continue to undermine the industry, it will pose challenges for budgets in the upcoming years.”
Concerns about higher taxes affecting operations have arisen in other states as well. Louisiana Gaming Control Board Chairman Christopher Hebert has warned that increased taxation could deter operators from participating in the market. Moreover, states like West Virginia and Arizona have put forward proposals to uplift their sports betting tax rates in recent months as they strive to address funding shortfalls caused by diminished federal support.