Michigan Senate Strips Per-Wager Tax From Budget Proposal

Sportsbooks in Michigan just scored an important win.

The state Senate passed a budget proposal this week after removing a per-wager tax requested by Governor Gretchen Whitmer. The proposal was modeled after a similar tax neighboring Illinois implemented last year. While Democrats control the chamber, several Democrats were unwilling to support this drastic change to Michigan’s sports betting market. 

The bill was also stripped of a proposed tax hike for online casinos, along with several other industries targeted by Whitmer.

Whitmer sought to follow Illinois’ lead

While the majority of lawmakers were opposed to Whitmer’s per-wager tax proposal, the Governor believed the state could follow the lead of its southern neighbors.

Illinois added a sliding fee for each wager accepted by mobile sportsbooks in the state. It was the second tax hike in a short time, and led to an aggressive retaliation from the sports betting industry. All of the state’s operators added surcharges or raised minimums, making it more expensive for bettors. 

The industry warned the move would permanently damage the thriving Midwestern market, but that hasn’t been the case. While total bets are down, the state has seen larger bets being placed, keeping revenue strong. 

Whitmer believed Michigan could follow the same path to boost its budget and offset federal funding cuts. 

Proposal shredded by lawmakers in both parties

Whitmer met strong resistance from lawmakers from both chambers who believe the Illinois model is no longer viable.

One reason for that belief is the fear of a response from the sports betting industry. The fight in Illinois got very ugly for a long time as sportsbooks looked to send a message to other states considering similar action. If Michigan had tried to become the second state to add a per-wager tax, the response could have been far more severe and permanently hindered the state’s market.

Another concern centered around sports prediction markets, which have exploded in popularity since Illinois passed its own tax last summer. That means more Michigan bettors are familiar with the emerging industry, and could make the switch if costs to place wagers in the regulated market go up. There’s no guarantee those bettors would come back even if the tax was dropped, making it a significant gamble. 

Lawmakers also reject a ban on promo deductions

The per-wager tax was the bigger headline, but the budget also proposed to ban sportsbooks from making deductions for promo bets. The industry has insisted that this is a critical tool for driving business and keeping the betting market active. 

However, those deductions also take a significant chunk of tax revenue away from the state. Whitmer’s proposal could have added over $20 million to the annual tax revenue from sports betting, but only if sportsbooks didn’t pass that cost along to new customers.