Michigan governor wants to copy Illinois sports betting taxation - to what end?

• Gov. Gretchen Whitmer is looking to raise $38.8m for Michigan’s Medicaid Benefits Trust Fund
• She believes imposing levies on sports wagers, similar to what Illinois has done, is the way forward
• Gov. Whitmer has failed to acknowledge the immediate impact the tax has had on sports betting operations, with Illinois mulling a possible overturning of the tax

Michigan’s governor, Gretchen Whitmer, is looking to boost tax revenue for the state’s coffers and fund the state’s healthcare program, but she may be looking at the wrong places.

Just recently, Whitmer suggested that she would not mind aligning the Great Lakes State’s taxation of sports gambling closer with what Illinois is currently doing, even though the Prairie State signalled it may be dropping its new 25-cent levy per wager, which has arguably been tied to a smaller overall betting handle on the Super Bowl this year.

Whitmer thinks rising taxes on gambling would result in the windfall Michigan needs

Whitmer’s new budget proposal encompasses other areas as well, including tobacco, vapes, digital advertising, and notably features a new Internet tax on casinos.

Whitmer hopes that by copying the model that involves setting specific levies per bet (and thus worsening odds for the players), she could help fund the Medicaid Benefits Trust Fund that needs $38.8m.

Whitmer defended the theoretical introduction of a levy on every customer wager by giving Illinois as an example, but without going into whether the tax was actually a sustainable practice long-term, and citing Michigan’s own leniency with sports betting taxation.

"The same tax was enacted in Illinois last year. Michigan’s sports betting tax rate currently ranks 28th out of the 30 states that have legalized the activity. Michigan’s tax rate remains the lowest among neighboring states."

Whitmer has a point, as the current tax on betting is set at 8.40% in the state. The governor is also aiming for free credits and bonus money that are hitherto tax-free. However, Gov. Whitmer wants to change that and stop operators from deducting these bonus credits from their taxable base.

Gov. Whitmer believes her office may raise $21.1m from eliminating the free play deduction, add another $38.8m from the new sports betting tax, and critically raise an extra $135.5m from the floated new tax on Internet casinos.

At the same time, Illinois is now debating overturning the per-wager tax, faced with a mix of challenges - including falling consumer activity locally as well as surging trading volumes on prediction markets.

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