Michigan Governor Gretchen Whitmer has thrown three "gambling tax bombs" in the newly announced budget, the most eye-catching of which is the second "per-bet tax" scheme in the nation—sports betting platforms must pay 25 cents to the state treasury for each bet processed, increasing to 50 cents after the annual number of bets exceeds 20 million. The state treasury estimates that this fee could bring back $39 million annually, along with the excessive progressive tax on online casinos and the cancellation of promotional deductions, totaling nearly $200 million in new tax revenue, mainly used to fill the Medicaid gap after federal funding cuts. Simply put, seeing Illinois did this last year, the governor thinks it's a quick way to make money and wants to copy it. However, the Republican-controlled House of Representatives immediately threw cold water: "Don't even think about adding a penny in the budget." The former legislator who led the legalization of gambling in Michigan even harshly criticized: "This is personally pushing the top market in the US into Lake Michigan." The gambling tax revenue battle is intensively staged in state legislatures. Want to keep up with the latest developments in the US sports betting tax reform? PASA's official website continues to track legislation firsthand.
First, copying the Illinois model: $0.25 per bet, rising to $0.5 after 20 million bets per year
Whitmer's per-bet tax proposal is completely benchmarked against Illinois's mechanism first created in 2025:
$0.25 per bet: Applies to the first 20 million bets per year
$0.50 per bet: For all bets after the first 20 million
The state budget office estimates that this fee could bring Michigan an additional $39 million annually. In addition, the budget proposal also includes:
Excessive progressive tax on online casinos: Maintaining a 28% tax rate for monthly revenues up to $185 million, and 36% for amounts exceeding that, expected to increase revenue by $136 million.
Cancellation of promotional betting deductions: Operators will no longer enjoy the benefit of deducting promotional betting amounts from taxable income, expected to increase revenue by $21 million.
With these three measures, a total of nearly $200 million in additional gambling tax revenue is packaged by the Democratic governor into a $800 million new tax plan, specifically to support Medicaid.
Second, the Illinois precedent: After the per-bet tax, betting volume plummeted by 15%
Illinois was the test field for the "per-bet tax," but the results were not impressive. The Illinois Gambling Commission reported that statewide sports betting numbers fell by 15% year-over-year after the new fee took effect, with operators passing on costs to players by charging transaction fees. State Representative Jehan Gordon-Booth warned colleagues at the National Gambling Legislators Annual Conference: "You think raising taxes will bring in more money? Not at all." Christopher Herbert, chairman of the Louisiana Gaming Control Board, also agreed, stating that high tax burdens would only drive operators out of the state.
Currently, Illinois legislators have proposed the HB 5143 bill, attempting to abolish the per-bet tax mechanism. Michigan's "copying homework" at this time was mocked by former Representative and current Fanatics Vice President of Government Affairs Brandon Eden: "Just Google it and you'll know that Illinois's revenue is declining month by month, it's not rocket science, it's just elementary school math."
Third, strong political resistance: Republican Speaker says "not a penny of tax will pass"
Whitmer's tax blueprint had just been released when it hit the wall controlled by the Republican-controlled House of Representatives. Speaker Matt Hall categorically stated at a press conference: "There will be no tax increases in this budget." The Republican Party has long held an anti-tax stance, and consensus must be reached by the June deadline, making a unilateral Democratic push almost impossible.
Eden expressed disappointment with his former employer's choice: "I spent my entire legislative career building Michigan's gambling market, and now the governor wants to dismantle it herself." He bluntly stated that Whitmer's logic was "baffling" and warned that the per-bet tax would sink Michigan from the top gambling state in the US directly "to the bottom of the lake."
Fourth, multi-state tax reform wave: Arizona, West Virginia propose plans
Michigan is not alone. Last month, Arizona Governor Hobbs threw out a proposal for a maximum tax rate of 45% on sports betting; West Virginia legislators are also pushing to raise the tax rate from 10% to 25%. Industry observers point out that state budget deficits and federal funding cuts are the main drivers, and a wave of gambling tax reforms is expected across the US this year.
However, the lesson from Illinois is clear: excessive legal platform tax burdens will only drive players to unregulated illegal operators and prediction markets. Finding a balance between filling financial gaps and maintaining market health is becoming the sharpest game between state legislatures of both parties, operators, and consumers.
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This article is from "PASA-Global iGaming Leader" gambling industry news channel:https://t.me/pasa_news
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