Lawmakers in Michigan and Arizona are considering substantial tax increases on sports betting operators, with proposals that could alter how regulated sportsbooks function in both states.
In Michigan, Governor Gretchen Whitmer has included several gambling tax hikes in her proposed budget, which seeks to raise $800 million in new taxes to help stabilise Medicaid funding. The plan introduces a per-wager fee similar to Illinois’ model. Sportsbooks would pay 25 cents on each of their first 20 million annual wagers and 50 cents for every bet thereafter, a measure estimated to generate up to $39 million per year.
Whitmer also proposed increasing the online casino tax rate by 8 percent on revenue above $185 million, raising it from 28 percent to 36 percent. That change could bring in as much as $136 million. Ending promotional deductions would add an estimated $21 million from sportsbooks.
Debate Over Per-Bet Fees
Illinois adopted a per-bet fee after replacing its flat 15 percent tax with a tiered structure ranging from 20 percent to 40 percent. After the fee took effect, some operators introduced transaction charges to offset costs. Illinois Gaming Board reports show wagers fell 15 percent year-over-year following implementation.
Michigan’s proposal faces resistance from Republicans, who control the state House. “There will be no tax increases in this budget when we do this deal.”
Brandt Iden, now vice president of government affairs at Fanatics Betting & Gaming and a former Michigan lawmaker involved in online gambling legislation, criticised the proposal. “I am disappointed that the Governor didn’t call me first on this one, I could have helped with the math,” Iden said. “Her decision-making paradigm is very perplexing. I don’t understand why a state would seek to replicate the failing gaming tax structure that is Illinois. A simple Google search will uncover that since Illinois enacted a per wager tax, gaming revenues have significantly declined month after month.
“This isn’t rocket science, it’s simple math. Instituting these Whitmer tax hikes will plummet Michigan from one of top gaming markets in the country to the bottom of Lake Michigan. I spent my legislative career on this issue, developing the optimal policy for the state and working with stakeholders to craft one of the most successful and sustainable commercial and tribal gaming markets in the country. It’s a shame that the Governor is seeking to destroy a market that we worked so hard together to create.”
Arizona Targets High-Volume Sportsbooks
In Arizona, Governor Katie Hobbs has proposed raising the sports betting tax rate to 45 percent for operators handling at least $75 million in monthly wagers. Since 2021, all sportsbooks have paid 10 percent.
Her budget states: “As the industry changes, it is clear that not all operators are alike, with a handful of large operators capturing the majority of the market. Low privilege fees and generous tax deductions have allowed these operators to achieve record corporate profits. In response, states across the country have continued to modify and update their regulatory structures since 2021, raising fees and leaving Arizona in a competitive disadvantage.”
Other states, including West Virginia, are also weighing higher rates as they address funding gaps.
Source:
“The Takeaway: Hey Governors, Stop Trying To Make Sports Betting Worse”, closingline.substack.com, February 11
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