Michigan Governor Proposes New Sports Betting & Casino Tax Hikes to Fund Medicaid

Michigan Governor Proposes New Sports Betting & Casino Tax Hikes to Fund Medicaid

Michigan is another state where taxes on sports betting and other forms of gambling may increase this year. The fact that Gov. Gretchen Whitmer (D-MI) wants to copy a strategy from neighboring Illinois could be even worse for gamblers and gaming businesses.

Illinois implemented a new tax in 2025 that charges 25 cents per wager on the first 20 million bets that an operator books. After the first 20 million bets, the fee doubles to 50 cents each bet. Whitmer wants to introduce that plan to Michigan in an effort to raise $38.8 million for the Medicaid Benefits Trust Fund. In fact, Illinois is specifically mentioned in that state's budget briefing.

"The same tax was enacted in Illinois last year,” according to a briefing on the Whitmer budget. “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.”

According to The Tax Foundation, Michigan's current sports betting tax rate of 8.40% is the second-lowest in the country, only surpassed by Iowa and Nevada, both of which have rates of 6.75%.

Whitmer wants to do away with the promotion deduction as well

The list of states that have eliminated or are considering doing away with tax exemptions provided to sportsbook operators for their promotional expenditures now includes Michigan.

Sportsbooks usually use their free bets as a way to attract and keep customers. These bets and promotional expenses can be subtracted from net sports betting profits in a number of states. States have a drawback because those deductions result in lost revenue.

According to Whitmer's budget proposal, removing those tax breaks would generate an additional $21.1 million for Michigan. Operators would probably spend less on promotions if it were to occur.

“Free play is an incentive for gamblers, allowing them to begin placing sports wagers at no initial cost,” according to the proposal. “Under the budget proposal, sports betting providers would no longer be able to deduct those wagers.”

 iGaming is also under attack

Only seven states allow iGaming, and Michigan is one of them. The online casino industry is booming in Michigan. Whitmer is aware of this, as the governor intends to raise the tax rate from 28% to 36% for operators with adjusted gross sales above $185 million.

“Last year, only three of Michigan’s internet casinos met the threshold for the higher tax rate to apply,” as noted in the budget briefing. “It is forecast to generate $135.5 million in new tax revenue in FY27, with the majority going directly to the Medicaid Benefits Trust Fund in support of health and wellness programs.”